Raise your hand if you saw this coming: Yahoo will expand its board of directors from nine to 11 members and will let gadfly investor Carl Icahn fill three slots.
Icahn will take one new seat. One Icahn ally will get the other new seat, and the third Icahn candidate will get the seat vacated by current Yahoo board member Robert Kotick, who will leave the board as part of the deal. The two Icahn candidates will be named later.
The agreement between Yahoo and Icahn avoids a proxy battle for Yahoo’s board. Yahoo’s entire board is up for re-election on Aug. 1.
Icahn’s attempt to takeover Yahoo’s board was weakened when Yahoo investor Legg Mason last week said it would support Yahoo’s slate of candidates for the board, not Icahn’s. Icahn owns just less than 5 percent of Yahoo, while Legg Mason controls about 4.4 percent.
This will not end the melodrama, however. Icahn intends to agitate for some sort of deal, and given his actions thus far, preferably with Microsoft.
Everyone else at Yahoo will be holding their collective breath hoping the ad deal with Google gains regulatory approval, and that that relationship helps Yahoo prosper enough that Yahoo can either remain independent or sell for a higher price.
Microsoft, lagging Google in the online market just as Yahoo is, will need to make some sort of deal. Notable candidates include Yahoo (still), Time Warner Inc.’s AOL and News Corp.’s MySpace, though there are other potential partners.
Icahn said: “I am very pleased that this settlement will allow me to work in partnership with Yahoo’s board and management team to help the company achieve its full potential. While I continue to believe that the sale of the whole compan, or the sale of its search business in the right transaction must be given full consideration, I share the view that Yahoo’s valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders.
“I believe this is a good outcome and that we will have a strong working relationship going forward. Additionally, I am happy that the board has agreed in the settlement agreement that any meaningful transaction, including the strategy in dealing with that transaction, will be fully discussed with the entire board before any final decision is made.”
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