Carl Icahn, the enigmatic billionaire activist investor, is considering whether to mount a proxy fight to take control of board seats at Yahoo, according to people who have spoken with Icahn. Icahn himself has declined to comment.
Late last week, Icahn built a significant position in Yahoo that may be as much as 50 million shares worth more than $1.2 billion. While other activist investors had considered mounting a fight to replace all of Yahoo's board, they stood down from that effort when they were unable to confirm that Microsoft would support them.
Last week, Microsoft abandoned an unsolicited $47.5 billion bid for Yahoo, and had threatened a proxy fight to oust Yahoo’s board. (CNBC is owned by NBC Universal, Microsoft’s joint venture partner in msnbc.com.)
Icahn has also been unable to get a confirmation that Microsoft will return to the negotiating table should all or part of Yahoo's board be replaced, according to those close to him. But unlike other investors, Icahn may choose to forge ahead anyway. If he does, he seems likely to run a so-called "short slate" of directors, targeting perhaps three or four of Yahoo's 10 board seats.
It would be a risky strategy, especially because beyond a deal to sell out to Microsoft, there don't appear to be too many levers to pull to create near-term shareholder value.
But if Icahn were to win those three or four board seats, as would seem highly likely given investor disenchantment with Yahoo's board, chances are good he could force a deal with Microsoft — if Microsoft is willing. His hope would be to play a role similar to that which he played in the sale of BEA Systems, in which his pressure helped bring Oracle back to a deal it had previously abandoned.
Icahn has a history of treading where others fear to go, often creating positive outcomes that were initially difficult to imagine.
If Icahn does decide to move ahead with a proxy fight, he'll have to move fast. The deadline for filing a slate is Thursday. But that shouldn't be a problem: Icahn could always use many of the same nominees put forward when he challenged Time Warner's board.
Still, without any real sense from Microsoft that it will stop its schizophrenic behavior, he will be taking a big chance.