Yahoo is a big risk for Icahn
Activist investor Carl Icahn became a billionaire by targeting distressed companies, but his pursuit of Yahoo Inc. could leave him with a black eye -- and a hole in his wallet -- if he’s wrong about Microsoft Corp.’s desire to buy the Internet pioneer.
Icahn, 72, has used guile, gall, grit and gamesmanship to get his way more often than not since he began targeting vulnerable companies 30 years ago. The conquests helped Icahn build an estimated fortune of $14 billion after starting out on Wall Street with a $4,000 bankroll from his winnings playing poker.
His roll call of stock market successes includes profitable showdowns with Marshall Field, Phillips Petroleum, Texaco, USX and, most recently, BEA Systems. There have been flops too: the now-defunct airline TWA and video rental chain Blockbuster Inc., whose stock has lost nearly two-thirds of its value since Icahn bought a stake in the company in 2005 and muscled his way onto the board of directors.
At more than $1 billion for a 4.3% stake, Icahn’s bet on Yahoo represents one of his biggest ever.
The payoff -- or possible loss -- will hinge largely on the irascible financier’s matchmaking skills as he tries to patch up a tiff between two fellow billionaires, Microsoft Chief Executive Steve Ballmer and Yahoo CEO Jerry Yang.
If he can’t persuade Ballmer to change his mind and renew his pursuit of Yahoo, Icahn could find himself holding a losing hand as investors bail out of Yahoo’s stock.
“There may be some unintended consequences to Icahn’s actions that he hasn’t fully thought about,” said Dennis Carey, senior client partner for Korn/Ferry, which specializes in recruiting chief executives and directors for corporate boards.
Icahn hasn’t returned repeated phone messages left by the Associated Press during the last three weeks.
But it’s doubtful that Icahn, an avid chess player who majored in philosophy at Princeton University, hasn’t considered the risks of his Yahoo gamble, said his biographer, Mark Stevens, who wrote “King Icahn” in 1993.
“He is always thinking 10 moves ahead of the other guy,” Stevens said. “He looks at business through the lens of Socrates and Nietzsche as opposed to how it was taught in Harvard Business School.”
Yahoo found itself in Icahn’s cross hairs after Microsoft withdrew a $47.5-billion takeover offer for one of the Internet’s best-known franchises.
Like many investors and analysts, Icahn is convinced Yahoo’s sale to Microsoft represents those two companies’ best chance to mount a more serious challenge to Internet search and advertising leader Google Inc.
But Ballmer reasoned that a takeover wasn’t in the cards after Yang told him Yahoo’s board didn’t want to sell for less than $37 a share, amounting to more than $52 billion.
Unless Ballmer wavers from that stance, Icahn could wind up in a tough spot when Yahoo’s annual meeting rolls around Aug. 1.
If Yahoo shareholders are angry enough to oust the company’s current board for its handling of Microsoft’s takeover bid, Icahn and eight other men that he has nominated as alternative directors could wind up trying to figure out a way to accelerate Yahoo’s growth in the booming Internet ad market.
The uncertainty raised by a boardroom coup might cause Yahoo’s stock price to sink, saddling Icahn with substantial losses.
Even if Yahoo’s directors hold on to their jobs, most analysts think Yahoo shares are likely to plunge if there’s no hope for a Microsoft takeover.
