labels: Infotech, M&A, Microsoft, Yahoo!
Carl Icahn may lead Microsoft's fight for Yahoo news
14 May 2008

Carl C IcahnBillionaire investor Carl C Icahn, who holds over 50 million shares in Yahoo!, is considering a proxy campaign to elect new board members after the internet search major failed to forge a deal to merge with Microsoft Corporation, reports quoting sources close to the development said.

Icahn's move comes less than a fortnight after Microsoft was forced to withdraw its $47.5 billion offer for Yahoo!. 

Reports say he may put up an entire rival board to replace all 10 directors - considered a high risk gambit. Commentatore, however,  point out  that while Icahn may reduce the number of directors for election later, he cannot raise it if he were to have begun witha smaller number.

The deadline for Yahoo! board nominations ends tomorrow.

Icahn, who bought as many as 50 million shares of Yahoo!, worth over $1 billion, in a bid to press for seats on its board, had also contacted Microsoft to inquire whether he could help bring the two companies back to the negotiating table. Icahn, however, is unlikely to join other hedge funds in the campaign, the sources said.

Icahn, is banking on the support of several other Yahoo shareholders, who are at odds with the Yahoo! management for rejecting Microsoft offer.

The Yahoo board has also recently been receiving a spate of letters from Yahoo! shareholders criticising the company's tactics during negotiations with Microsoft.

However, all management baiters are expected to back Icahn. Bill Miller, the portfolio manager at Legg Mason, which owns six per cent in Yahoo!, had supported the idea of a merger with Microsoft, but said he was unsure of supporting Icahn's proxy war.

Yahoo co-founder and chief executive Jerry Yang had sought a minimum $37 a share bid for itself against Microsoft's offer of $33 a share.

Microsoft, which originally bid $31 a share in cash and stock, refused to raise it further and ended discussions with Yahoo!.

The Yahoo! scrip, which was ruling at around $19 before Microsoft bid, have since been hovering around $25, even below the original Microsoft offer of $31

The scrip rose five per cent to $26.56 after CNBC reported Icahn's interest.

In the past, Icahn has been successful in forcing change at some of the biggest US corporations like TWA and Time Warner, although he had to abandon a proxy contest at Time Warner. He also orchestrated a deal between Oracle and BEA Systems last year.


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Carl Icahn may lead Microsoft's fight for Yahoo