Yahoo rejected Microsoft's advances and demanded more money, Microsoft dropped its bid, Yahoo said it might want to make a deal, but Microsoft said no way. Thus the Microsoft-Yahoo saga, ended, correct? Not quite, it appears that a new chapter is about begin as Yahoo faces its most significant threat to its independence, this time from within.
Over the last week, billionaire investor Carl Icahn has been amassing shares, and not so quietly building a massive stake in Yahoo. Now Icahn is moving ahead with plans to run a slate of dissident board members who if elected will force the company to sell itself to Microsoft.
Last night Icahn selected his "dream team" of 10 new directors, including himself. His other selections are Keith Meister, vocal Dallas Mavericks owner Mark Cuban , and Viacom's former chief executive Frank J. Biondi Jr.
In a letter to Roy Bostock, current board chairman, he blasts Bostock and the board's handling of the Microsoft situation and their leadership. He says, "the board of directors of Yahoo has acted irrationally and lost the faith of shareholders."
He continues, "It is quite obvious that Microsoft's bid of $33 per share is a superior alternative to Yahoo's prospects on a standalone basis....it is irresponsible to hide behind management's more than overly optimistic financial forecasts."
Icahn condemned the board's failure to put the issue to a shareholder vote calling it "unconscionable". He states that a merger is the only good option, saying, "I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with (Google Inc.)"
Icahn's other candidates are Lucian Bebcuk, John Chapple , Adam Dell , Edward Meyer, and Brian Posner. Many of these individuals have worked with Icahn in past proxy fights. Icahn said he moved to engage in proxy war at the bequest of Yahoo shareholders after they became dissatisfied with the half-hearted attempt at a merger, something which he and the shareholders, he says, feel that "the current board has completely botched".
Icahn purchased around 59 million Yahoo shares, valued at around $1.5B USD. Meanwhile, Microsoft quietly requested antitrust clearance from the Federal Trade Commission to acquire $2.5B USD of Yahoo stock, which it could used to help Icahn in his fight. In a reversal of past policy, Icahn is soliciting Microsoft for a bid, while Microsoft has remained silent. Icahn has recruited the help of proxy company D.F. King for the solicitation.
Some suspect Yahoo's leadership may try to cut a deal with Icahn giving him a couple board seats if he's willing to drop his proxy battle. Earlier this year, such a deal was cut between New York Times Co. and a dissident board slate, giving them 2 of 15 seats. However, some suspect no deal will be made as a couple seats would be unlikely to be enough to further negotiations with Microsoft, Icahn's purported primary objective.
Icahn has been a major force in past deals. He forced BEA Systems to be sold to Oracle Corp. earlier this year. He completed a fiercely fought proxy battle with Motorola Inc., which end in him designating two board seats, and being promised by Motorola that it will spin off its mobile devices unit. He also forced Time Warner Inc. to adopt a number of major policy reforms. Icahn also had a hand in the recent Blockbuster and Circuit City deal.