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Icahn poised to push Yahoo slate

He may try to unseat the entire 10-person board, sources say. But does Microsoft still want the company?

May 15, 2008|Joseph Menn and Jessica Guynn | Times Staff Writers

Billionaire investor Carl Icahn is moving ahead with plans to nominate directors for the board of today, two people familiar with his thinking said Wednesday, giving investors a chance to show how badly they want the Internet company sold.

The famed corporate activist, who has purchased 50 million Yahoo shares, has asked 12 people whether they would be willing to serve if asked, the people said, and may try to take control of the Internet powerhouse by unseating the entire 10-person board.

Among the dozen is former Viacom Inc. Chief Executive Frank Biondi, the people said.

Reports that Icahn was considering running a full slate surprised some major shareholders, who had been told by Icahn's allies just a day before that he intended to put forward only a few names to serve as agitators.

"I hadn't heard it even contemplated he would do a full slate," one big Yahoo investor said. "It puts more pressure, to the extent he actually does it, on Yahoo. But it also comes with attendant risks for Icahn. Getting a full slate elected is more difficult."

Still unclear late Wednesday was whether Icahn would be able to entice Microsoft Corp., which recently withdrew its $47.5-billion offer for Yahoo, back to the bargaining table. The Redmond, Wash.-based maker of Windows and Office software wants to combine with Yahoo in order to compete better with Google Inc. in the burgeoning market for Internet advertising. Microsoft earlier this month dropped plans to run its own slate of deal-friendly candidates for the board. It declined to comment Wednesday.

"The million-dollar question now is: Is Microsoft a buyer or not?" said Anthony Valencia, an analyst at Yahoo investor Trust Co. of the West.

Many investors have criticized Yahoo's incumbent directors for failing to accept Microsoft's unsolicited takeover offer. Microsoft made a public bid of $31 a share in cash and stock Feb. 1 and eventually raised its offer to $33 a share. But it broke off talks May 3 after Yahoo asked for $37 a share.

That breakdown left investors plotting how best to pressure Yahoo to restart the negotiations. Some welcomed Icahn's entry into the fray this week but said they were nervous about putting the maverick strategist in full charge of the company.

Yet Icahn may have found enough support in his conversations that he thought he could win control, according to allies and analysts.

"Icahn knows he has a higher burden to meet to get the support of shareholders when you are handing the keys to the car to an entirely new board," said Chris Young, director of mergers and acquisitions research at advisory firm RiskMetrics Group.

Icahn couldn't be reached, and Yahoo, as well as potential board member Biondi, declined to comment.

Some who have studied Icahn's past moves said they thought he had either gotten confirmation that Microsoft was still interested in Yahoo or was playing a hunch that it would be.

"When Carl acts, shareholders usually benefit, because he has an extraordinary intellect and an extraordinary amount of money to make things go his way," said Mark Stevens, author of the book "King Icahn."

"All of these CEOs think one or two moves ahead," said Stevens, owner of management and marketing consulting firm Mark Stevens & Co. "He's thinking 10 moves ahead."

Yahoo may attempt to derail Icahn's campaign before the annual meeting by announcing a long-anticipated deal to run Google advertising next to Yahoo's Web search results, said analyst Youssef Squali of Jefferies & Co.

When he withdrew his offer for Yahoo, Microsoft Chief Executive Steve Ballmer complained that a Google pact could complicate any acquisition considerably.

Because Icahn is believed to be acting strictly for the sake of a company sale, it's reasonable for him to run a full slate, said Young of RiskMetrics.

"It really becomes a referendum on a deal, rather than a referendum on the quality of the board," he said. "There is no hidden agenda."

Bill Miller, who manages billions of dollars for Legg Mason Capital Management and is among the largest Yahoo investors, said he didn't know whether he would want an Icahn-dominated board.

"We would have a fiduciary duty to consider an alternative slate," Miller said. "Whether we would support it would depend on the facts and circumstances. It would depend on the people nominated, the platform, the response of Yahoo's directors, etc."

The identities of most of the expected nominees couldn't be learned.

Yahoo shares gained 58 cents to $27.14. They had tumbled to $24.37 the first trading day after Microsoft walked away.

"We continue to believe Microsoft is the most likely suitor for Yahoo and that there is still a strong likelihood the deal happens, whether through shareholder activism or Microsoft returning on its own," Piper Jaffray & Co. analyst Gene Munster said.

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joseph.menn@latimes.com

jessica.guynn@latimes.com

Menn reported from Los Angeles, Guynn from San Francisco.

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