Does Icahn have a backup plan?
Billionaire investor Carl Icahn's proxy
fight for Yahoo is aimed at reigniting merger talks between the Internet
company and Microsoft, but he may have to prepare a backup plan in case Microsoft
is unwilling to return to the bargaining table.
After Microsoft walked away from its US$44.6 billion bid
to acquire Yahoo, the company has been clear, publicly at least, about moving
on, and executives said they are not interested in purchasing Yahoo anymore.
"It's not clear that Microsoft is still at the [bargaining] table,"
said Ned May, an analyst with Outsell. "That's a bit of a problem."
If Icahn can't woo Microsoft back as a Yahoo suitor, he may end up in the position
of being the director of a company that no one wants to buy. And as Icahn has
never seemed very interested in actually running someone else's business, this
would put him in a rather risky situation.
Having made his $14.5 billion fortune by taking calculated risks, however,
it's likely Icahn is preparing himself for the worst-case scenario. A source
close to the billionaire investor said he may be consulting with IAC/InteractiveCorp
CEO Barry Diller as he mounts his proxy battle for Yahoo.
One possible topic of the talks could be a plan to sell off parts of Yahoo
to IAC, which owns Ask.com,
a competitor to Yahoo's search engine.
IAC has faced its own troubles of late as it prepares to split itself into
five pieces, and could be bolstered by acquiring Yahoo's advertising network
and users.
However, it's unlikely that IAC, with a market cap of $6.6 billion, could afford
such a deal, although it's clear Diller is interested in expanding his company's
media properties, however far-flung they may end up being. On Thursday, IAC's
Ask.com announced plans to buy Lexico
Publishing Group, the owner of Dictionary.com,
Thesaurus.com
and Reference.com.
It wouldn't be surprising if Icahn also was speaking with other executives
to prepare himself for the event that Microsoft won't return to negotiate a
deal. News Corp. has
been rumored as a potential suitor now that Microsoft is out of the picture;
however, on a May 8 conference call, executives said the company is not in talks
to purchase Yahoo at this time.
News Corp. did not reply to a request for comment on Thursday.
One analyst noted that "cash is pretty tight these days," which might
make it risky for any company to invest in Yahoo if Microsoft won't bite.
Moreover, "Yahoo worked pretty hard to find other suitors to counter Microsoft,
and were apparently unsuccessful in lining those up," said the analyst,
who asked not to be named. If no one besides Microsoft came forward during the
two months it haggled with Yahoo over a price, it's unlikely anyone would be
willing to buy the company now, he said.
A multimedia deal between Icahn and Diller is not unprecedented. Two years
ago, the two billionaires were rumored to be interested in joining forces to
link up pieces of IAC and Time Warner, in which Icahn is an investor. However,
nothing concrete ever materialized.
Right now it seems Yahoo investors will be supportive of Icahn's proxy battle,
even as Microsoft remains silent. IDC analyst Caroline Dangson pointed out that
Yahoo shares rose 5 percent after his proxy fight was unveiled, indicating some
support for the plan.
Indeed, Paulson and Co., an investment firm that holds 50 million shares of
Yahoo, came out in favor of Icahn's proxy fight on Thursday in an e-mailed statement,
but said it hopes the end result will be a deal with Microsoft, not Icahn taking
over the company.
Other major shareholders that had expressed ire over Yahoo's not accepting
Microsoft's offer and are likely to support Icahn's proxy fight are Capital
Research, which owns 16 percent of Yahoo, and Legg Mason, which owns 7 percent.
Shareholders will get to officially weigh in on Icahn's proposed new board
at an annual stockholder meeting July 3. Unless Microsoft and Yahoo iron out
a deal by then, Icahn may walk out of the meeting the proud new leader of a
$38 billion Internet company.
James Niccolai in San Francisco and Juan Carlos Perez in Miami contributed
to this report.
IDG News Service
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