Microsoft, Icahn Double-Team Yahoo

Includes: MSFT, YHOO
by: The Deal Economy

Yahoo! Inc. (NASDAQ:YHOO) shares were up 12% yesterday, to $23.91, on news that Microsoft Corp. (NASDAQ:MSFT) is interested in buying the Internet company's search assets, or Yahoo! as a whole, if shareholders elect a new board of directors.

Taking the tag from Microsoft, Carl Icahn, who is waging a proxy fight against Yahoo!, issued a letter on Monday to shareholders stating that the software maker is willing to enter deal talks discussions immediately if a new board is elected. Icahn did not indicate parameters of either deal.

The latest twist in the seemingly endless saga between Yahoo! and Microsoft obviously provides a boost for Icahn's slate of candidates. The activist investor has pushed to sell the company, but investors have appeared reluctant to support him after Microsoft said in May that it was no longer interested in acquiring all of Yahoo!.

One key is whose side the leading proxy advisory services will take in the governance fight at Yahoo!. With Microsoft saying that it would return to the bargaining table, the proxy firms have some room to back Icahn's slate. However, without elaborating on what kind of deal could be struck and at what price, Icahn is unlikely to win the wholehearted backing of thee firms.