Yahoo's Settlement with Icahn Puts Microsoft Takeover to Rest - For Now

From the press release:

Yahoo! Inc. announced today that it has reached an agreement with Carl Icahn to settle their pending proxy contest related to the Company's 2008 annual meeting of stockholders. Under the terms of the settlement agreement, eight members of Yahoo!'s current Board of Directors will stand for re-election at the 2008 annual meeting: Roy Bostock, Ronald Burkle, Eric Hippeau, Vyomesh Joshi, Arthur Kern, Mary Agnes Wilderotter, Gary Wilson and Jerry Yang.

In view of the settlement agreement with Mr. Icahn, and the termination of the proxy contest, Robert Kotick has decided not to stand for re-election to the Board at the 2008 annual meeting.

Following the 2008 annual meeting, the Yahoo! Board will be expanded to 11 members. Carl Icahn will be appointed to the Board and the remaining two seats will be filled by the Board upon the recommendation of the Board's Nominating and Governance Committee from a list of nine candidates recommended by Mr. Icahn, which includes the eight remaining members of the Icahn slate of nominees and Jonathan Miller, currently a partner in Velocity Interactive Group and former Chairman and CEO of AOL.

As part of the settlement agreement, Mr. Icahn, who owns an aggregate of 68,786,320 shares, or 4.98% of Yahoo! common stock, has agreed to withdraw his nominees for consideration at the annual meeting and to vote his Yahoo! shares in support of the Board's nominees.

"We are gratified to have reached this agreement, which serves the best interests of all Yahoo! stockholders," said Yahoo! Chairman Roy Bostock. "We look forward to working productively with Carl and the new members of the Board on continuing to improve the Company's performance and enhancing stockholder value. Yahoo! is a world-class company with an extremely bright future, and collaborating together, I believe we can help the Company achieve its ambitious goals."

"This agreement will not only allow Yahoo! to put the distraction of the proxy contest behind us, it will allow the Company to continue pursuing its strategy of being the starting point for Internet users and a must buy for advertisers," said Yahoo! Co-founder and Chief Executive Officer Jerry Yang. "No other company in the Internet space has our unique combination of global brand, talented employees, innovative technologies and exceptional assets, attributes that will help us take advantage of the large and growing opportunity ahead of us. I look forward to working together with our new colleagues on the Board to make that happen."

Mr. Icahn said, "I am very pleased that this settlement will allow me to work in partnership with Yahoo!'s Board and management team to help the Company achieve its full potential. While I continue to believe that the sale of the whole Company or the sale of its Search business in the right transaction must be given full consideration, I share the view that Yahoo!'s valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders. I believe this is a good outcome and that we will have a strong working relationship going forward. Additionally, I am happy that the board has agreed in the settlement agreement that any meaningful transaction, including the strategy in dealing with that transaction, will be fully discussed with the entire board before any final decision is made."

Ok. So that ends, once and for all, the Icahn takeover talk. That also, I think, puts to rest all talk of Microsoft taking over Yahoo! anytime soon. Let's just say that this time it's final. No more Microhoo.

At least not for a few quarters, while Yahoo announces its results. If, in the near future, or anytime within the next year or so, Yahoo tanks to below $15, then the subject might come up again, but as of now, there's no scope for Microsoft to reignite the talks.

At this time, I'd say Yahoo would stabilize around $20, but its still going to be volatile until the next quarter. Oh, and one other thing to remember - Icahn bought all those Yahoo! shares at values hovering around $23 to $24, which means that unless Yahoo! climbs, he's actually in for some red ink.

Comments

[Gerry Sullivan:]

A big defeat for Icahn. Usually when an activist makes a move on a company he has to accomplish one thing to be successful: gain control.

In the case of Yahoo, Icahn had to both get control and get Microsoft to acquire the company. In this case he was not able to do either.

2008 Jul 21 08:18 AM

[fxtrader07:]

icahn will eat the yhoo board for lunch. their relief will not last long. if the stock dips, icahn will buy more. meanwhile he gets access to very valuable information and gets control of three seats on the board. not bad for a <5% stake! yang and co get a slower exit and another opportunity to bring in another bad quarter or two before they finally get thrown out. rather than a defeat for icahn, this is a capitulation by yang and co - barely covered up.

2008 Jul 21 09:25 AM

[mikezane:]

Boo for yahoo, I have a distinct distain for Icahn and his ilk. Pity they had to partner up, I would have preferred they soundly defeat the jerk. Can't believe Yang sold out like that. It is almost as if he got scared and started spinning around in circles. Bullies don't stop being bullies just because you are now one of their minions, Jerry.

2008 Jul 21 04:31 PM

[glasses:]

Yang and his cohorts should be thrown out, head first.
The stock will never reach into the 30's, again, on its' own.
Ever since Yang "killed" the idea of being with Microsoft,
the stock has gone backwards.

2008 Jul 21 07:22 PM

[andyn:]

on the contrary, the fox has been let into the chicken coop. He will be the agitator he is and I think this is GOOD for the shareholder since the existing mgmt obviously is not performing (see today's earnings disappointment). I think you would see some sort of deal by the next qtr around Oct. This is actually a good time to get in and get out before that. Might not go to $33 but could go to $28.

2008 Jul 22 06:21 PM