Icahn to Yahoo board: Sell to Microsoft or leave

Carl Icahn plans a shareholder revolt against Yahoo’s board.

SAN FRANCISCO (AP) — Yahoo Inc. Chief Executive Jerry Yang spent months fending off Microsoft Corp.’s unsolicited takeover bid. Now he may have only a few weeks to persuade the software maker to revive its last offer of $47.5 billion, or risk being fired in a shareholder mutiny led by activist investor Carl Icahn.

Spurred on by outraged shareholders, Icahn notified Yahoo on Thursday that he will lead a revolt to oust Yang and the rest of the Internet company’s board unless they renew negotiations with Microsoft that fell apart May 3 when the two sides couldn’t agree on a price.

To pressure Yahoo, Icahn has nominated an alternate slate of directors to replace the current board in an election scheduled July 3 at Yahoo’s annual meeting. If the uprising is successful, an Icahn-led board presumably would fire Yang as CEO and try to negotiate a sale to Microsoft.

To gain leverage in the looming battle, Icahn revealed that he has spent more than $1 billion snapping up 59 million Yahoo shares and options to give him a 4.3 percent stake in the Sunnyvale-based company. He plans to seek approval from the Federal Trade Commission to acquire up to $2.5 billion in Yahoo stock, including his current holdings.

Icahn’s challenge opens a dramatic new chapter in a saga that began Jan. 31 when Microsoft stunned Yahoo with a takeover bid that started out at $44.6 billion, or $31 per share, and then rose to $47.5 billion, or $33 per share, earlier this month.

The showdown now features at least five billionaires with diverse agendas:

Yang and fellow Yahoo co-founder David Filo, who believe Yahoo is worth at least $53 billion; Icahn and basketball team owner Mark Cuban, who has agreed to help shake up the company that made him rich; and Microsoft CEO Steve Ballmer, who, until recently at least, viewed Yahoo as a key weapon in his crusade to topple Internet search and advertising leader Google Inc.

Hoping to seal the deal, Ballmer orally offered to buy Yahoo $33 per share. But Yang and Filo — speaking on behalf of Yahoo’s board — sought $37 per share, a price the stock hasn’t reached in more than two years. The impasse prompted Ballmer to withdraw the bid.

In a letter sent Thursday to Yahoo Chairman Roy Bostock, Icahn lambasted the board’s actions as “irresponsible” and “unconscionable,” given that Yahoo’s stock stood at $19.18 before Microsoft first made its bid. He urged the board to reopen the talks.

“I believe that a combination between Microsoft and Yahoo is by far the most sensible path for both companies,” Icahn wrote.

A Yahoo representative said the company would respond to Icahn “soon.”

Yahoo shares rose 61 cents, or 2.3 percent, to finish Thursday at $27.75. That’s the stock’s highest closing price since Microsoft broke off talks.

While Icahn made it clear he wants Yahoo sold to Microsoft, there are no guarantees the software maker is still interested in buying its rival.