Yahoo board battle over; war continues

Update:

Looks like Carl Icahn has managed to strike a deal with Yahoo to avoid an all-out proxy battle over board members. According to a news release this morning, the two sides have agreed to a settlement that involves expanding the Yahoo board so that two Icahn representatives and Icahn himself can have seats. This effectively negates the need for the settlement proposed by Eric Jackson, which is described below — although as Charles Cooper at CNET notes, this has given the fox a seat on the board of the henhouse. So while the current battle may have ended, the war over Yahoo’s future continues.

Original post:

Before activist shareholder and billionaire takeover artist Carl Icahn got involved with Yahoo, and not long after Microsoft started making overtures towards the company behind the scenes, a disgruntled shareholder named Eric Jackson was already trying to marshal support for some big changes at the Internet company, including the departure of CEO Terry Semel, who eventually wound up leaving. Using his blog, YouTube videos and an aggressive lobbying effort aimed at institutional shareholders, Jackson managed to get a substantial amount of support and press for his campaign. Whether his efforts helped to force Semel out or not is open to debate, but it certainly helped crystallize some of the dissatisfaction surrounding the company.

Eric, who formed an activist investment fund called Ironfire Capital as a result of his efforts, is still pushing for change at Yahoo, and this morning he launched a forum on Agoracom.com, a small-cap investor-information portal based in Toronto and founded by George Tsiolis. Jackson wants an alternate slate of Yahoo directors, but not the slate suggested by Icahn; instead, he is proposing a middle-of-the-road solution, in which several Yahoo board members get to keep their spots, but others are removed to make way for some of Icahn’s substitutes (but not Mark Cuban; sorry Mark). Shareholders are encouraged to mark their voting cards as described in a statement by Eric and posted on Agoracom.

Jackson says that some investors are uncomfortable with Icahn’s proposed slate because it would remove every Yahoo board member, raising concerns about continuity and the possible triggering of a poison-pill style compensation package. The activist shareholder says that his proposal “will maximize the change so desperately needed” at the Internet company without any of those drawbacks. According to a news release issued this morning, Eric says that his “Plan B” group of Yahoo shareholders includes 150 members, who own 3.2 million shares in Yahoo! worth over $70 million. Yahoo’s annual meeting is August 1.

Hey Jerry: Welcome to the big-time

“Smokey, my friend, you are entering a world of pain.” — John Goodman as Walter Sobchak, in The Big Lebowski

Yahoo CEO Jerry Yang might be feeling pretty good about winning Round One with Microsoft CEO Steve Ballmer, the former basketball coach with the Young Frankenstein-style features and the pit-bull reputation. Unfortunately for Jerry, however, this appears to be a tag-team match, and Steve may have unwittingly tagged in The Terminator, otherwise known as Carl Icahn — a guy who was waging all-out proxy wars when Jerry Yang and David Filo were still shoving quarters into the Space Invaders machine down at the local video-game parlor.

According to several reports, including one in the Wall Street Journal, Carl has acquired about 50 million shares or so of the Internet giant, and may be planning to start a proxy battle so that he can shove Yahoo into the arms of Microsoft and get a nice pop for his trouble. That kind of thing is like falling off a log for Carl, a guy who helped define the term “corporate raider” and has gone after companies like RJR Nabisco, Texaco, Time Warner and Motorola. Carl has taken over companies — or been bought out by companies — in between lunch and dinner.

Ballmer apparently gave up on Yahoo in part because he was afraid of a proxy war, and/or was concerned that the company might do a deal with Google or otherwise muddy the waters and make it harder to establish a value for the company that Microsoft could live with. For Icahn, that kind of thing is like chum in the water — it means that there is something bleeding nearby, something vulnerable, something worth taking a run at. In other words, just the kind of scenario that my friend Kara Swisher describes so vividly in her post. If Jerry thought that Microsoft was his biggest problem, he may have another think coming.