The better part of valour is discretion
In his personal blog, activist investor Carl Icahn, who recently abandoned his fight to replace the entire Yahoo! board in favour of a seat on the board for him and two of his mates, revealed his thinking behind the compromise.
“By the end of last week, I realized that although many large shareholders supported me and my slate for the board, they were nervous about having a complete change of control,” said Icahn.
“From prior proxy contest experience, I have discovered that a minority position on the board can be also quite effective. Therefore, I determined to attempt to reach an agreement with Yahoo! which had reached out to me several times during the past week to reach a compromise.”
So it looks like the whole thing was going to go down to the wire and neither party really fancied risking everything. It’s not surprising to hear that the Yahoo! board had been “reaching out” to Icahn, especially since it knew its quarterly earnings, released yesterday, were going to be nothing special.
Revenues were up six percent year-on-year, but operating income was down 45 percent and net income was down 19 percent. Yahoo! was quick to point out that a significant chunk of income – around $22 million – was eaten up on advisors’ fees over the course of Microsoft’s take-over attempt and the subsequent proxy fight with Icahn.
Icahn concluded by saying that a significant part of his agreement with Yahoo! is that “I will be offered the chance to serve on any committee established to consider material transactions out of the ordinary course of business.”
He also pointed out a part of the agreement that seems to amount to more or less the same thing: “...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.”
Icahn concluded by making it clear that now the contest is over he will be less constrained and will communicate more frequently in future. Could be interesting.
