Carl Icahn Makes His Move To Oust Yahoo Board, Which Has “Completely Botched” Microsoft Merger Talks

As Danny reported earlier, Billionaire investor Carl Icahn is making a proxy move to oust the Yahoo board in an effort to reignite takeover talks with Microsoft. Just a few minutes ago a press release was issued by Icahn explaining his intentions and rationale.

It says, in part: It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft. It is quite obvious that Microsoft’s bid of $33 per share is a superior alternative to Yahoo’s prospects on a standalone basis. I am perplexed by the board’s actions. 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. 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.

Icahn also says “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.”

In the letter Icahn proposes his alternative slate of directors:

Lucian A. Bebchuk Frank J. Biondi, Jr. John H. Chapple Mark Cuban Adam Dell Carl C. Icahn Keith A. Meister Edward H. Meyer Brian S. Posner Robert K. Shaye

One major irony here is that Yahoo made would-be Yahoo director Mark Cuban a billionaire when it purchased his Broadcast.com, a dubious asset, for in excess of $5 billion. That, and not Yahoo’s allegedly “botched” negotiation with Microsoft (as Icahn calls it), arguably ranks as the company’s greatest screw up.

Yahoo’s annual shareholder meeting is July 3 and at that time we’ll know whether this effort has succeed or failed. If it succeeds, presumably, the new board would move immediately to restart talks with Microsoft. Assuming Microsoft were still interested, it would be in an arguably stronger position than it was with Roy Bostock, Jerry Yang, et al, in control of Yahoo. That’s because these new directors really want the deal and would thus have less negotiating strength, ironically. Microsoft might accordingly be able to lower the per-share bid it would be willing to pay.