Posted by: Rob Hof on July 20, 2008
Lately, it has looked like Yahoo, against all odds, might win the proxy fight that activist investor Carl Icahn is waging against it. The problem for Icahn is that, without a plan for Yahoo beyond selling it to Microsoft or at least wangling a better deal for Yahoo’s search operations, even angry Yahoo shareholders don’t want to vote in a board that has no apparent plan for what to do with Yahoo if Microsoft doesn’t return. What’s more, if a majority of new directors is elected, that may trigger Yahoo’s poison pill or at least its potentially expensive employee retention program.
Now, activist shareholder Eric Jackson, who got attention last year when he called for former Yahoo CEO Terry Semel’s ouster, is offering a third way: Vote for four of Icahn’s dissident directors—in particular venture capitalist Adam Dell, who had invested in HotJobs, which Yahoo bought; ad execs Edward Meyer and John Chapple; and Harvard prof and executive-compensation critic Lucian Bebchuk.
“Right now, Yahoo has the edge,” says Jackson, who now runs a hedge fund, Ironfire Capital. “I wanted to pick people who would be beyond reproach—independent thinkers with no baggage.” At the same time, he’s recommending withhold votes against Yahoo Chairman Roy Bostock, as well as directors Ron Burkle and Arthur Kern, who received a surprisingly high number of such votes last year, and longtime Yahoo director Eric Hippeau.
Jackson still faces a big challenge, absent a new and appealing move by Icahn or Microsoft, or some dumb move by Yahoo. The company’s increasingly aggressive attacks on Icahn and Microsoft in various letters and statements seem to be hitting home, so it’s feeling stronger right now. More than that, if Icahn can’t get his whole slate elected, there’s no chance individual dissident directors will get elected either unless shareholders settle on a few specific ones. Protest votes likely will get diluted among the 10 people on the dissident slate. (Whoever gets the most votes wins, regardless of which slate they’re on.)
That’s why Jackson is tossing out these suggestions, in the hope of rallying support for a minority slate that could push Yahoo’s board to do a deal with Microsoft. He also has set up a site for smaller investors (the big ones will keep their own counsel) to offer suggestions or support for his picks.
There are less than two weeks left before Yahoo’s Aug. 1 annual meeting, though. And so another race against time begins. Of course, if Microsoft manages to rouse itself to craft a more attractive another deal of some kind, all this may prove moot.