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May 15, 2008, 9:36 am

Icahn starts Yahoo proxy fight

Carl Icahn is out with his first shot across Yahoo’s (YHOO) bow. Icahn, the activist investor who has been building a stake in the Internet company in anticipation of a proxy fight, says he wants to replace the board so he can put together a deal with Microsoft (MSFT). Icahn says he believes the board has “acted irrationally and lost the faith of shareholders and Microsoft” by turning down a sweetened takeover bid at $33 a share. In typical fashion, Icahn goes on to call Yahoo’s actions “irresponsible” and “unconscionable,” and pronounces himself “perplexed.”

Icahn isn’t allowing his perplexity to stand in the way of action, however. He says he owns 59 million shares, has assembled a 10-member alternative board slate and has asked the Federal Trade Commission for permission to buy as much as $2.5 billion worth of stock. Icahn’s current stake is worth $1.6 billion at Thursday’s price of $27.45 a Yahoo share.

“During the past week, a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched,” he writes in a letter to shareholders. “I believe that a combination between Microsoft and Yahoo is by far the most sensible path for both companies.”

Does Yahoo really need to deal/merger with anyone? Or does Microsoft just want a larger internet prescence?

Posted By Patrick, Belleville, IL. : May 23, 2008 1:34 pm

If Microsoft is allowed to buy Yahoo, I’ll never use Yahoo services again. Microsoft has had plenty of time to build their own portal. There’s a reason why relatively few people use it: it’s lousy.

Posted By CF, Baltimore, MD : May 16, 2008 12:44 pm

This guy a bully, nothing more nothing less. Microsoft should spend less time trying to buy things up and start actually making decent products or they will be the ones being bought out in 5 years.

Having money doesn’t make you the know all, and this guy tops my list of bully buyings.

Posted By Seattle : May 15, 2008 5:17 pm

Yahoo is a dieing entity it needs a fresh face, I agree Microsoft could do it.

Posted By leah Ashburn, VA : May 15, 2008 4:24 pm

I would love to know how the previous poster said

“I know YHOO shares are going back up to about $35 in a year or so, even without Ichan’s and his buddies.”

Who is he kidding, Yahoo has not seen that price in over two years, and there is nothing that yahoo is aspiring to, to make it go up that high. Yahoo has just been getting by and their shareholders need this deal.

Posted By Bruno, Elizabeth, NJ : May 15, 2008 12:48 pm

*****
I own shares in both Microsoft and Yahoo. Admittedly, I bought Yahoo at too high a price and will lose money when this deal goes down. Someone tell me the pros of this deal?
*****

I know YHOO shares are going back up to about $35 in a year or so, even without Ichan’s and his buddies.

Ichan probably purchased the shares between $29 and $30. Let us say he manages to change the board and sell YHOO to MSFT, he would not sell it below $33.

So in any case you all can rest and take it easy.

Personally I prefer, Icahn stay out of a business, he does not understand. He says merger between MSFT & YHOO is in best interest of both companies. Well for all his money he really is a nincompoop (no disrespect intended).

Posted By Raman, Plano TX : May 15, 2008 12:03 pm

Icahn has no interest in Yahoo! He seeks only short term financial gain, and shareholders who follow his path should consider WHY they bought the stock in the first place (assuming they consciously did so). Unless he’s working in collusion with MSFT to ultimately see Yahoo! swallowed by them, it’s hard to see what Icahn’s other interests might be. Under these circumstances, MSFT would acquire a shell, since most of the folks who matter at Y! will bail, and those who would be financially enticed to stay, will do so only as long as their retention agreements are in place.

It’s helpful to note that MSFT has NEVER made any money on their Internet business…latest drain = ~$290 million last quarter. They’ve thus far, in recent months, spent nearly $11BN on search (Fast) and advertising (Aquantive) capabilities, with very little to show for their investments. Yahoo!, for all its problems, REMAINS the single most visited web site on the Internet. That is, after all, one of the main reasons MSFT was interested in acquiring that firm. This activity has just begun, and it’s Yahoo! time to shine…let’s encourage them o make it happen.

Posted By WilKo, San Francisco : May 15, 2008 11:43 am

Icahn is upset that he posses to lose $900 million. dude we all lose out on the stock market at times, you took a gamble that isn’t panning out your way. you plan to lose a lot more than me because you are a lot richer than i am, but welcome to the average investors world

Posted By jarryd alex va : May 15, 2008 10:48 am

Many people do not like Microsoft. If Yahoo merges with Microsoft I think many Yahoo users will defect to Google.

Posted By Zachary, Seattle, WA : May 15, 2008 10:46 am

yep! those yahoo guys were acting too cool for microsoft. I am glad Carl emerged from nowhere and is willing to help get the real walue for shareholders

Posted By lesego : May 15, 2008 10:38 am

Icann’s proxy battle is not going to benefit the average share holder. He’s past proxy battles never did. He’s out for his own gain. Yang should have followed in the footsteps of Mark Zuckerberg and holding on to the majority of is company.

Posted By Anonymous : May 15, 2008 10:38 am

I own shares in both Microsoft and Yahoo. Admittedly, I bought Yahoo at too high a price and will lose money when this deal goes down. Someone tell me the pros of this deal?

Posted By Patrick, Belleville, IL. : May 15, 2008 10:33 am

Cheers to Icann. It’s time Silly Yang and company are booted out.

Posted By Eclectic Investor, Mumbai, India : May 15, 2008 9:46 am
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Colin Barr covers business and finance for Fortune.com. Previously he was an editor at TheStreet.com and author of the weekly Five Dumbest Things on Wall Street column, and an editor at Dow Jones Newswires.
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