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Yahoo buys time with Icahn ceasefire

22 июля 2008

Yahoo bought some breathing space on Monday in its long struggle to remain independent, agreeing a ceasefire with Carl Icahn in return for giving up three board seats to the activist investor.

However, some investors and analysts warned that the pact would not put an end to the bruising battle with Microsoft that has transfixed the consumer internet business for much of this year.

Yahoo rebuffed Microsoft’s most recent overture little more than a week ago, after failing to agree terms for an acquisition by the software company earlier this year. An eventual deal with Microsoft was still likely, these people said.

Mr Icahn, who had proposed replacing Yahoo’s current nine-member board with his own slate of directors at the company’s annual meeting on August 1, agreed to abandon his fight in return for a seat for himself on Yahoo’s board, plus the right to propose two other directors.

The agreement will force Yahoo’s directors to work closely with a vociferous critic who has called repeatedly in recent weeks for the removal of Jerry Yang, chief executive.

Yahoo has become increasingly fierce in its criticism of Mr Icahn, pointing to his self-declared lack of knowledge about the internet business. Larry Bostock, chairman, tried to put the best light on the compromise on Monday, saying that the Yahoo directors “look forward to working productively with Carl” and his nominees. Mr Icahn proposed Jonathan Miller, a former head of rival internet service AOL, as one of his nominees.

Youssef Squali, an analyst at Jefferies, said that the former AOL executive would act as Mr Icahn’s “insurance policy”, and be ready to step in to run the company if Mr Yang fails to revive the company’s fortunes.

A compromise with Mr Icahn had seemed increasingly likely in recent days as his bid to tap into shareholder anger at the company’s failure to reach a deal with Microsoft has faded. 

“I’m shocked they gave him anything,” said one Yahoo shareholder, adding it had already become clear that Mr Icahn was facing defeat at next week’s shareholder meeting.

In the clearest sign of how the mood had turned against him Bill Miller, of Legg Mason, one of the company’s biggest investors, said late last week that he would not back Mr Icahn.

Despite having control of only three seats on an expanded Yahoo board of 11, some investors said that Mr Icahn’s presence added to the likelihood of an eventual sale of some or all of Yahoo to Microsoft.

“There are people outside Yahoo who want a deal, and now there are people inside who want a deal,” one shareholder said. “I think this makes it more likely.”

Another Yahoo investor said unless Mr Yang could prove his turnround at Yahoo was working he would face even more shareholder pressure at next year’s annual meeting. “They’ve got another year,” this person added.

Источник: Financial Times

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