Icahn to Fit Yahoo Board over Microsoft Bid

Billionaire and shareholder activist Carl Icahn has announced that he is putting together a rival slate of directors to replace Yahoo’s existing board. His reason is the rather stupid move by the board to reject Microsoft’s offer of $33 a share, a 72% premium over the market price. Mr. Icahn deserves to win.

Mr. Icahn has about 50 million shares of Yahoo, which cost him around $1 billion. That is a 3.6% stake in the company, a big enough holding that the current board needs to take him seriously. Moreover, he has let it be known that he’s in the market for another $2.5 billion worth of stock, seeking Federal Trade Commission permission to do so. If one were offered a 72% premium on a $1 billion investment, one would do exactly as Mr. Icahn is doing.

Said Mr. Icahn, “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 on the Internet.” He added that the board had acted “irrationally” in rejecting the bid out of hand, and he said it was “unconscionable” that the board hadn’t let the shareholders make up their own minds.

The shareholder meeting is July 3, and it should be one of the more exciting fights of the summer. Mr. Icahn is not the kind of guy to roll over once his temper is up. Meanwhile, the current board faces losing control of Yahoo if they fail to convince stockholders. The board has promised that things at Yahoo are going to pick up by 25% or so, but whether they have any credibility remains to be seen. A betting man might want long odds before going against the Icahn plan.

Yet even if the rebels take control of Yahoo, Microsoft is under no obligation to renew its bid. There is the matter of the poison pill that would prevent a hostile takeover, but a friendly board could make that go away. Microsoft has all the control in this situation, and that means it can probably take advantage of Mr. Icahn’s move and get Yahoo at the price it wants. This would have been so much easier if the first bid, or even the second, had gone to the shareholders for their approval.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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