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Yahoo and Icahn settle; Microsoft deal seen adrift
Investor Carl Icahn speaks at the Wall Street Journal Deals & Deal Makers conference in New York, June 27, 2007. |
Yahoo Inc will appoint activist investor Carl Icahn and two of his nominees to its board, defusing a proxy battle showdown and making an immediate deal with Microsoft Corp less likely.
The settlement with Icahn, announced on Monday, came just 11 days before Yahoo’s August 1 annual shareholders meeting. Icahn had originally sought to replace the entire board with his own nominees and oust Yahoo Chief Executive Jerry Yang.
But Icahn’s campaign appeared to have failed to win backing from key shareholders such as Legg Mason fund manager Bill Miller, who said on Friday he would support Yahoo’s board. Legg Mason owned 4.4 percent of Yahoo, according to recent filings.
Icahn failed to convince many investors that if he had won control of Yahoo at the upcoming annual meeting, that he had any alternative for turning the business around, other than to sell it in part or in whole to Microsoft.
“It may be possible it does generate some positive change. Perhaps Icahn can drive some more staff reductions, persuade it to divest its Asia investments,” Jeffrey Lindsay, an analyst at Sanford C. Bernstein, said of the settlement.
“Overall it seems much less likely that there will be a transaction with Microsoft. The market is already reading it that way,” he added. “This looks like a compromise and in general most of these compromises, certainly with ones with Icahn in the past, have reinforced the status quo.”
A Microsoft spokesman declined to comment on its next move, but the company will no doubt face questions about its Internet strategy at its annual analyst meeting on Thursday.
Yahoo has said Microsoft’s various deal proposals have undervalued its business and instead reached a search advertising partnership with arch rival Google Inc to boost its performance.
Source: Reuters
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