updated 10:05 am EDT, Thu May 15, 2008
Icahn Yahoo Stake
Investor Carl Icahn on Thursday revived the once-dead possibility of a Microsoft takeover of Yahoo by announcing his plans to launch a proxy battle to overturn Yahoo's existing board of directors. The billionaire's plans are now known to be more aggressive than recent rumors have predicted and include the nomination of a slate that would completely replace the Yahoo overseers, essentially guaranteeing a Microsoft buyout of the search engine firm by installing a board friendly to the idea. Icahn himself is one of the nominees.
Icahn deems the bid necessary as he believes Yahoo needs to join Microsoft to form a company large enough to compete with Google, which otherwise effectively controls the web ad and search markets. Microsoft's raised bid of $33 per share is a "superior alternative" to what Yahoo plans to do on its own, and turning this down without even basic input from shareholders is evidence of stubbornness, the investor suggests.
"It is irresponsible to hide behind management's more than overly optimistic financial forecasts," he says, referring to Yahoo's belief that positive results and forecasts confirm the company's independence.
Icahn now owns 59 million shares in Yahoo, which gives him significant influence in voting for a Microsoft-friendly board.
Yahoo, meanwhile, is still attempting to safeguard itself against possible buyouts by expanding its Google deal. A permanent deal to use Google ads for some of its searches will theoretically increase Yahoo's revenues and also discourage Microsoft from making a bid, as it would force Microsoft to either run ads from Google or else pull the program.