Yahoo! may have won the battle but not the war. Barely have the board of directors at Yahoo! breathed easy, after Microsoft withdrew its offer to buy over the company and decided against a hostile takeover, when they have to face the wrath of some very angry investors, who believe Yahoo! should have accepted Microsoft’s offer.
Leading the pack is Carl Icahn, who purchased 50 million shares – about 4 percent – of Yahoo! at $1.3 billion, after Microsoft walked away from the deal. He is known to have a history of waging corporate battles against companies and pressurizing them into taking decisions they had earlier resisted.
Icahn has threatened to motion for an alternate board of directors to replace those who are currently on the board, during the next shareholder meeting, which has been scheduled for July 3. The deadline to nominate these directors is May 15.
According to the Wall Street Journal, he is not the only one baying for blood. There has been a lot of criticism from several shareholders over the board’s decision to refuse the Microsoft offer. Bill Miller of Legg Mason, Yahoo!’s second largest shareholder hopes Mr. Icahn can force the parties back to the negotiating table.
Although it is the majority shareholders who will determine the end result, a lot of small share holders are also upset with the present situation and feel that Yahoo! was wrong to turn down Microsoft. One of them, Eric Jackson, has decided to launch a ‘vote no’ campaign, to convince shareholders to out vote all 10 directors presently on the board. He wanted to wage his own proxy battle but realized that he could not afford the million dollar fight; hence the grass roots campaign. He feels the board has made several mistakes over the years, and Yahoo! shares have remained more or less steady over the last 4 years, in spite of the stock market rising 30% and Google stock going up by 440%.
According to Shirley Westcott, Managing Director of Policy at Proxy Governance, Mr. Icahn’s entry into the arena will put a lot of pressure on Yahoo! to renegotiate with Microsoft. She further adds, “if there is no progress, between Yahoo! and Microsoft, you could end up with enough angry shareholders and institutions voting the whole board out of office, and that would be a horrible scenario.” Robert McCormick at Glass Lewis and Company says that in such cases the company often negotiates with the main dissident shareholder and offers them a few seats on the board rather than risk losing a proxy battle which would be distracting, expensive and time-consuming for both sides.
Yahoo!, Mr. Icahn and Microsoft have all declined to comment.