A Very Hostile Bid for Yahoo Salvo From Icahn Opens Proxy War

By Peter Whoriskey
Washington Post Staff Writer
Friday, May 16, 2008; Page D01


When Microsoft chief executive Steve Ballmer was trying to buy Yahoo, he didn't want to appear disagreeable, let alone hostile.

Now comes billionaire investor Carl C. Icahn, who has no such qualms.

In launching his bid yesterday to replace the entire Yahoo board with a slate of his choosing, Icahn wrote a letter to Yahoo in which he called the board's actions in dealing with Microsoft "irrational," "irresponsible" and "unconscionable" -- all in the opening paragraph.

Yahoo Chairman Roy Bostock fired back: "Unfortunately, your letter reflects a significant misunderstanding of the facts . . . [the current board] remains the best and most qualified group to maximize value for all Yahoo! stockholders."

So went the first round in the new fight over Yahoo, one of the world's largest Web companies with 137 million monthly visitors.

Icahn, who has acquired 59 million shares of Yahoo, is trying to gain control of the Yahoo board and lure Microsoft back to buy the company. He is counting on the disgruntlement of other shareholders, who watched as the Yahoo board resisted Microsoft's $33-a-share bid, a large potential premium over the $19 shares were selling for before the offer.

"Microsoft wanted the deal to be friendly -- they didn't want to be seen as the hostile acquirer," said Chris Young, director of mergers and acquisition research at RiskMetrics Group, which advises large investors in such cases.

Ballmer's tactics were constrained by the fact that, if successful, he would be in charge of merging the companies, too.

But, Young said, "Icahn can take the heat."

Icahn, who is widely known for his aggressive posturing, enters the Yahoo drama as several technology and media companies are jockeying for position to dominate the Internet and all the billions of advertising dollars it could command.

So far, Google is way ahead.

The renewed battle for Yahoo is expected to be fierce and should last at least until early July, when Yahoo shareholders meet