Struggling Internet company Yahoo has struck a pact with its billionaire critic Carl Icahn by giving the hedge fund activist a minority presence on its board to avoid a potentially tempestuous showdown at a shareholder meeting next month.
Facing crumbling support among Yahoo investors, Icahn abandoned on Monday his efforts to overthrow the leadership of the embattled Silicon Valley company and force its sale to Microsoft.
Instead, the 72-year-old Icahn & Co hedge fund manager settled for an offer of three seats on Yahoo’s board. One director will stand down and the board will expand from nine to 11 members.
Wall Street analysts greeted it as a qualified victory for Yahoo’s founder, Jerry Yang (楊致遠), who has pressed hard to maintain its independence and who waged an energetic campaign to discredit Icahn.
Yahoo chairman Roy Bostock was “gratified” to reach a deal.
“We look forward to working productively with Carl and new members of the board on continuing to improve the company’s performance and enhancing stockholder value,” he said.
The pact ends a vitriolic two months in which Yahoo and Icahn have traded stinging accusations. The showdown arose after Yahoo turned down a US$47.5 billion takeover offer from Microsoft, angering investors who have grown impatient with its failure to keep up with Google as a leader in lucrative online searches.
As Yahoo’s annual meeting next Friday approached, the prospect of a hastily compiled slate of Icahn’s friends running the company appears to have been too much for institutional shareholders. The balance tipped on Friday when Yahoo’s second-biggest investor, the fund management firm Legg Mason, decided to support the existing leadership.
Scott Kessler, an equities analyst at Standard & Poor’s in New York, said the upshot amounted to a defeat for Icahn.
“The writing’s not only on the wall but on an agreement for all to see,” he said.
In spite of the deal, there would be pressure for a shake- up in recognition of discontent among a sizeable minority of investors, Kessler said.
“Jerry Yang’s been back in place for a year and a lot of people think he is not the right person for the job. It wouldn’t surprise me if there were some management changes to come,” Kessler said.
Icahn will take one of the board seats handed to his group under the deal, which is subject to approval by investors.
In a statement, Icahn said a sale of the firm or of its core search business should be given “full consideration.”
But striking a conciliatory note, he said: “I believe this is a good outcome and that we will have a strong working relationship going forward.”