NEW YORK - Yahoo Inc., will appoint activist investor Carl
Icahn and two of his nominees to its board, defusing a proxy battle showdown and
making an immediate deal with Microsoft Corp less likely.
The settlement with Icahn, came just 11 days before Yahoo's
August 1 annual shareholders meeting. Icahn had originally sought to replace the
entire board with his own nominees and oust Yahoo chief executive Jerry Yang.
But Icahn's campaign appeared to have failed to win backing
from key shareholders such as Legg Mason fund manager Bill Miller, who said on
Friday he would support Yahoo's board. Legg Mason owned 4.4 percent of Yahoo,
according to recent filings.
Icahn failed to convince many investors that if he had won
control of Yahoo at the upcoming annual meeting, that he had any alternative for
turning the business around, other than to sell it in part or in whole to
Microsoft.
"It may be possible it does generate some positive change.
Perhaps Icahn can drive some more staff reductions, persuade it to divest its
Asia investments," Jeffrey Lindsay, an analyst at Sanford C. Bernstein, said of
the settlement.
"Overall it seems much less likely that there will be a
transaction with Microsoft. The market is already reading it that way," he
added. "This looks like a compromise and in general most of these compromises,
certainly with ones with Icahn in the past, have reinforced the status quo."
A Microsoft spokesman declined to comment on its next move,
but the company will no doubt face questions about its Internet strategy at its
annual analyst meeting on Thursday.
Yahoo has said Microsoft's various deal proposals have
undervalued its business and instead reached a search advertising partnership
with arch rival Google Inc to boost its performance.
Yahoo shares fell 78 cents, or 3.5 percent, to $21.67, far below Microsoft's
last offer price of $33 per share, which was withdrawn in May. Microsoft shares
lost 22 cents to $25.64. - Reuters
