Icahn Moves to Force Microsoft-Yahoo Merger
The activist investor bulked up on Yahoo stock and launched a proxy fight for Yahoo's board, a list which includes several intimidating names
May 15, 2008
Activist investor Carl Icahn publicized a letter sent to Yahoo's chairman Roy Bostock announcing a proxy fight for control of the web portal's board, with the ultimate goal of relaunching negotiations with Microsoft.
In the letter, Icahn accuses the Yahoo's board with acting irrationally and of losing the faith of its shareholders after the Microsoft buyout collapsed, a potential deal he believed the board "completely botched." He added that he was dramatically beefing up his own stake in Yahoo after he says a number of shareholders convinced him to launch a power play.
Besides himself, the 10-person nomination slate includes some high-power names such as Mark Cuban, owner of the Dallas Mavericks basketball team and co-founder of the HDNet high-definition cable channel; Frank Biondi Jr., former chief executive of Universal Studios and Viacom; John Chapple, former chief executive of Nextel Partners; and Robert Shaye, co-chief executive of New Line Cinema.
The letter appears to be the culmination of the shareholder unrest that arose after Microsoft pulled its bid for Yahoo at the start of the month. On May 5, Yahoo stock plummeted amid questions that Yahoo was valuing itself as a standalone company too highly. Ichan himself called the Microsoft bid of $33 a share obviously superior.
"I am perplexed by the board's actions," Icahn wrote. "It is irresponsible to hide behind management's more than overly optimistic financial forecasts. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer."
Icahn said, within the last 10 days he acquired about 59 million shares and share equivalents of Yahoo, which on the whole has 1.38 billion shares outstanding. He's further seeking Federal Trade Commission antitrust clearance to purchase another $2.5 billion in Yahoo stock, which would amount to roughly 90 million additional shares based on the current stock price.
"While it is my understanding that you do not intend to enter into any transaction that would impede a Microsoft-Yahoo merger, I am concerned that in several recent press releases you stated that you intend to pursue certain 'strategic alternatives,' Icahn wrote. "I therefore hope and trust that if there is any question that these 'strategic alternatives' might in any way impede a future Microsoft merger you will at the very least allow shareholders to opine on them before embarking on such a transaction."
Besides Icahn, Cuban, Biondi, Chapple and Shaye, the nomination slate inlcudes Lucian Bebchuk, a Harvard law professor; Adam Dell, managing general partner of Impact Venture Partners; Keith Meister, principal executive officer and vice chairman of Ichan Enterprises; Edward Meyer, chief executive of investment management company Ocean Road Advisors; and Brian Posner, former chief executive of ClearBridge Advisors.
Ichan ended the letter saying, "I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary."
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