SAN FRANCISCO (AP) - Billionaire investor Carl Icahn
is setting out to oust Yahoo Inc.'s board of directors for "irresponsible" and
"unconscionable" actions that led Microsoft Corp. to withdraw a $47.5 billion
offer to buy the slumping Internet pioneer.
In a letter sent Thursday to Yahoo Chairman Roy Bostock, Icahn wrote that
outraged Yahoo shareholders had urged him to lead a campaign to replace Yahoo's
10 directors at the company's July 3 annual meeting in hopes of bringing
Microsoft back to the bargaining table.
"I believe that a combination between Microsoft and Yahoo is by far the most
sensible path for both companies," Icahn wrote.
To give him leverage in the looming battle, Icahn revealed that he has spent
at least $1.3 billion snapping up about 59 million Yahoo shares to give him a
roughly 4 percent stake in the Sunnyvale-based company. He plans to seek
approval from the Federal Trade Commission to acquire up to $2.5 billion in
Yahoo stock.
A Yahoo representative said the company would respond to Icahn's attack
"soon."
Icahn told Yahoo's board it could quickly quell the shareholder mutiny by
renewing negotiations with Microsoft.
Besides himself, Icahn's alternate board of directors includes Internet
entrepreneur Mark Cuban, who got rich by selling Broadcast.com to Yahoo for $8.1
billion in stock in 1999. Cuban used part of his Yahoo windfall to buy the
Dallas Mavericks, a National Basketball Association franchise that he still
owns.
Icahn's other notable nominees include: venture capitalist Adam Dell, whose
brother, Michael, founded Dell Inc.; and Frank Biondi Jr., the former chief
executive of Viacom Inc.
The revolt threatens to jettison Jerry Yang from the company that he started
with David Filo 14 years ago. Yang is one of Yahoo's directors and has been
trying to engineer a turnaround since taking the job of CEO 11 months ago.
Together, Yang and Filo -- both billionaires -- still own 134 million Yahoo
shares, or nearly 10 percent of the company.
Yang and the rest of Yahoo's board are on the hot seat for rejecting
Microsoft's initial bid of $44.6 billion, or $31 per share, and taking measures
that finally drove away the software maker.
Microsoft CEO Steve Ballmer orally offered to raise the offer to $47.5
billion, or $33 per share, earlier this month. He withdrew the bid May 3 after
Yang and Filo, acting on behalf of the Yahoo board, held out for $37 per share
-- a price that Yahoo's stock hasn't reached in more than two years.
Yang has argued Yahoo eventually will be worth more than $50 billion if it
can expand its share of a rapidly growing Internet advertising market that so
far has been dominated by rival Google Inc. In a forecast released while Yahoo
tried to thwart the Microsoft bid, management predicted net revenue growth of at
least 25 percent in 20009 and 2010 -- well above its recent pace of 12 percent.
"It is irresponsible to hide behind management's more than overly optimistic
financial forecasts," Icahn wrote. "It is unconscionable that you have not
allowed your shareholders to choose to accept an offer that represented a 72
percent premium over Yahoo's closing price of $19.18 on the day before the
initial Microsoft offer."
Yahoo shares rose 24 cents to $27.39 in midday trading Thursday.
While Icahn made it clear his challenge is aimed at selling Yahoo to
Microsoft, there are no guarantees the software maker is still interested in
buying its rival.
A Microsoft spokesman declined to comment on Icahn's letter, saying the
Redmond, Wash.-based company has "moved on."
That sentiment echoes what Ballmer and Microsoft executives have been saying
publicly as they pledged to find other ways to bolster the company's
unprofitable Internet operations and mount a more serious challenge to Google.
But many analysts believe Microsoft is just posturing as part of a plan to
depress Yahoo's stock so it will be easier to negotiate a friendly deal within a
few months. Others believe the window of opportunity is closing for a
Microsoft-Yahoo deal, given that it might be more difficult to win U.S.
antitrust approval for the combination after a new president ushers in a new
administration in January.
Collins Stewart analyst Sandeep Aggarwal is in the camp that believes
Microsoft will eventually buy Yahoo for $33 or $34 per share. The "body language
from Yahoo and Microsoft do not suggest that both companies have really moved
on," Aggarwal wrote in a Thursday research note.
If the two companies really abandoned hope for a deal, Aggarwal reasons they
would have already announced other moves indicating they were going in a new
direction.
For instance, Yahoo has been discussing a possible advertising partnership
with Google for weeks without agreeing to a deal. And if Microsoft weren't still
interested in Yahoo, Aggarwal believes the company would have already announced
another acquisition or "radical changes" in its strategy for building a more
compelling Internet search engine.
In his letter, Icahn urged Yahoo's board not to enter into any transactions,
such as a Google ad partnership, that might ruin the chances of a sale to
Microsoft. Ballmer cited Yahoo's flirtation with Google as one of the reasons
for Microsoft's bid.
Icahn has a long history of challenging corporate boards and his efforts
often result in shake-ups. Most recently, he has forced major changes at
Blockbuster Inc. and Motorola Inc. He also played a pivotal role in the recent
$8.5 billion sale of business software maker BEA Systems Inc. to rival Oracle
Corp., which dropped an earlier bid of $6.7 billion.
Copyright 2008 Associated Press. All rights reserved. This material may not be
published, broadcast, rewritten, or redistributed.
|