Icahn may run Yahoo proxy campaign: source

NEW YORK (Reuters) - Billionaire investor Carl Icahn is considering running a proxy campaign to elect new board members at Yahoo Inc (YHOO.O: Quote, Profile, Research, Stock Buzz) after the company failed to forge a deal to merge with Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz), a source close to the matter said on Tuesday.

The veteran investor has built up a stake in Yahoo in the last week and would run a slate in an effort to force the company back to the negotiating table with Microsoft, the source said, asking for anonymity because the decision to go ahead with the move has not yet been made.

It is unlikely that Icahn, a veteran of numerous proxy battles, will join with other hedge funds in the campaign, the source said. A decision to run a proxy slate this year must be made by Thursday for the July 3 annual meeting.

The size of the stake Icahn has built could not immediately be determined. He had no shares as of early last week, the source said. The Wall Street Journal said Icahn has amassed a stake of roughly 50 million shares, or less than 4 percent of the company.

One lawyer who has worked with Icahn in previous campaigns said such a campaign could have good odds of success, providing Microsoft is willing to come back to the bargaining table, which he said is probable.

"The odds are pretty decent," said Marc Weingarten, an attorney with Schulte Roth & Zabel, who said he is not currently involved in any plans for a Yahoo proxy campaign.

"Yahoo has a lot of unhappy shareholders. And if someone could press the company in getting something done, I would think there is a decent chance at a transaction."

One hedge fund manager who heads a large activist fund said it is "a likely possibility" that Icahn would run a Yahoo campaign. The manager, who has worked with Icahn on previous campaigns, asked to remain unnamed.

Microsoft walked away from its bid to buy Yahoo earlier this month after the Internet company turned down its offer to raise its price by $5 billion to $47.5 billion, or $33 per share. Yahoo demanded $37 per share.