Icahn to battle Yahoo to accept Microsoft bid
NEW YORK (Reuters) - Financier Carl Icahn launched a proxy battle on Thursday to force Yahoo Inc (YHOO.O) to reopen buyout talks with Microsoft Corp (MSFT.O), saying the Yahoo board had acted "irrationally" in refusing its $47.5 billion offer.
Icahn harshly criticized Yahoo for the breakdown in talks, saying he had accumulated 59 million shares and options in Yahoo and had assembled a 10-member dissident board slate for election at Yahoo's annual meeting on July 3.
In an open letter to Yahoo chairman Roy Bostock, Icahn said the board had "acted irrationally and lost the faith of shareholders and Microsoft. It is obvious that Microsoft's bid of $33 per share is a superior alternative than Yahoo's prospects on a stand alone basis." (For text of letter see nN15278966)
But the New York-based billionaire left the door open for a settlement instead of a full-blown proxy battle in which both sides typically spend millions of dollars and unleash a barrage of attacks against each other. Icahn urged Yahoo to "move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary."
Icahn's move garnered public support from at least one other large investor. Paulson & Co., a $30 billion hedge fund that raked in billions of dollars betting on the credit meltdown, disclosed Thursday it had amassed a 3.4 percent Yahoo stake worth $1.44 billion.
"We intend to support the Icahn slate, but sincerely hope Yahoo will negotiate an agreement with Microsoft, thereby making a proxy fight unnecessary," said Paulson.
On Thursday, Microsoft spokesman Frank Shaw repeated the same line it has used since the talks ended. "The company has moved on," he said. Yahoo declined to comment.
Two weeks ago, Microsoft walked away after negotiating for three months in hopes it could clinch a deal that would catapult the software giant into a top provider of on-line commerce and services.
Microsoft's final $33-per-share offer wasn't enough to sway Yahoo co-founder and Chief Executive Jerry Yang, who wanted $37 per share. Shares traded at around $19 prior to the Microsoft bid.
On Thursday, Yahoo shares closed up 61 cents, or 2.3 percent, at $27.75, while Microsoft stock was up 52 cents, or 1.7 percent, at $30.45, both on Nasdaq.
ROUGHER ROAD FOR YANG
Industry watchers said Yang faces a rougher road dealing with Icahn, a blunt-spoken veteran financier known for bare-knuckle takeover tactics, than with Microsoft CEO Steve Ballmer.
"If Jerry Yang had a tough time dealing with Steve, wait till he meets Carl Icahn," said Colin Gillis, a Canaccord Adams analyst.
A bigger threat, said Gillis, will be if Microsoft is unwilling to come back to the table. "It's not clear that he has a buyer. We think that Microsoft has really walked away."
Others said there is a reasonable chance of revived talks, arguing that the strategic rationale for Microsoft's initial interest in Yahoo hasn't changed in the last two weeks. Continued...
