A bunch of yahoos and an eccentric billionaire

When last we spoke I mentioned my bemusement at the actions of Yahoo! CEO Jerry Yang and the Yahoo! board of directors in rejecting a takeover bid from Microsoft that was very nearly twice what the market was valuing the company. I speculated then that the share price of Yahoo! would gradually drift downwards to where it had been before Microsoft’s approach and the board would realise what it had passed up.

I was only half right. The price did tumble in the days after Microsoft walked away, but only as far as $US22 (it had been around $US19 pre-bid and rose to around $US34 just before Ballmer pulled the plug).

Nonetheless, as the market’s judgement came down on the heads of the board, they must have wondered where they’d gone wrong.

I, of course, get to watch all of this with the smug detachment of the pundit, pointing a finger and mocking. I have no stake in either Microsoft or Yahoo! and no intention of gaining a stake in either. I have no capability, nor wish, to influence events.

I am not Carl Icahn.

Carl Icahn is a “corporate raider,” a “billionaire investor” and perpetual “disgruntled shareholder”. This essentially means that, where you or I might get annoyed at poor service we receive from a company, Icahn buys the company and fires the people responsible. And a bunch more.

His money directly buys him influence.

Most famously it bought him influence with Trans-World Airways in 1985. He acquired the struggling airline and proceeded to sell its most valuable assets — anything profitable — to competitors. Then he left, but not before arranging for another one of his companies to have a sweetheart deal with TWA allowing it to buy air tickets at 45 percent off. His influence led to TWA filing for bankruptcy twice, in 1992 and 1996. Sending a company bankrupt once is impressive — twice is astonishing.

Now Icahn is annoyed at Yahoo! He’s unimpressed at the board’s response to the Microsoft bid, and has announced his intention to purchase sufficient stock in the company to stage a proxy battle at the shareholders’ meeting in July and, if he can swing it, replace the current ten-member board with his own team. This team, he opines, will be much more amenable to the idea of a Microsoft takeover.

Whether he has actually asked Microsoft if it still wants Yahoo! or not is unclear. It probably doesn’t matter. Microsoft did say it wasn’t prepared to engage in a proxy battle to force the takeover. Too costly, too messy.

Icahn isn’t troubled about cost or mess. Just ask TWA.

He’s prepared to spend $US2.5 billion of his own money, apparently because he thinks that the Microsoft-Yahoo! deal ought to have gone forward. Others thought otherwise, but what does that matter — they don’t have $US2.5 billion.

The price of Yahoo! stock is rising again, thanks to Icahn. If the board members were confused about how to feel before, imagine what they’re thinking now.

Matthew JC. Powell did all the research for this article using Google. Find him on mjcp@optusnet.com.au

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