Battle for Yahoo's Board Cranks Up a Notch
Mar 29, 2012 9:15 AM PT
It appears that Yahoo and shareholder Third Point are digging in for a contentious proxy fight.
The companies have been tussling over who will fill four seats on the board of directors, with the two sides clashing on several points, including whether Third Point CEO Daniel Loeb should get one of the spots.
On Sunday, Yahoo announced three new independent directors to the board, effective April 5: John D. Hayes, EVP and chief marketing officer of American Express; Peter Liguori, former COO of Discovery Communications and former chairman and president of entertainment of Fox Broadcasting Network; and Thomas J. McInerney, the outgoing chief financial officer of IAC/InterActiveCorp.
Yahoo said it considered Third Point's nominees but determined that Hayes, Liguori and McInerney were the best-qualified candidates. It found only one of Third Point's choices acceptable -- turnaround expert Harry Wilson -- and said it would search for a second mutually acceptable nominee.
Third Point Fires Back
Loeb responded to Yahoo's announcement with a sharply worded letter to CEO Scott Thompson. He took issue with Yahoo's refusal to consider him, as well as the company's attitude toward shareholders in general.
"Only in an illogical Alice-in-Wonderland world would a shareholder be deemed to be conflicted from representing the interests of other shareholders because he is, well, a shareholder too," he wrote. "This sentiment further confirms that Yahoo!'s approach to Board representation is 'shareholders not welcome.'"
A Company in Transition
In general, these are tumultuous days for Yahoo.
There was the unceremonious ouster of Thompson's predecessor, Carol Bartz, last year. The company has since extensively overhauled its executive structure, prodding chairman Roy Bostock and three board members to step down -- a move that paved the way for the current conflict with Third Point.
Cofounder Jerry Yang has also left the firm.
Still, more change appears to be coming. There have been rumors that the company is poised for a massive restructuring, which would include a significant round of layoffs.
Or a Company in Decline?
With a 5.8 percent stake representing more than US$1 billion, Third Point is Yahoo's largest outside shareholder, and its wishes clearly carry some heft. Aside from that consideration, Third Point may well be right in arguing that Yahoo is a company in decline, and serious action needs to be taken to right its direction, said Paul Levinson, professor of communications and media studies at Fordham University.
"Yahoo rejected Microsoft's 2008 $44.6 billion offer but has only declined since then," Levinson told the E-Commerce Times. "Once No. 1 on Alexa, Yahoo has been surpassed by its rival Google. Short of an influx of new blood, which the Third Point bid would provide, Yahoo is likely to continue to decline."
Yahoo's shareholders no doubt feel they have legitimate grievances against the company, said David Cadden, professor of management in the Quinnipiac University School of Business. "Yahoo is in the unenviable position of having lost its dominant position as the de facto search engine to Google."
More to the point, its current value is less than half the amount that Microsoft offered in its failed merger proposal. "This makes for very unhappy investors," Cadden told the E-Commerce Times.
Loeb, who wants to see Yahoo focus on its cash-generating businesses associated with advertising, is in a good position to whip up stockholder discontent with the current board of directors, he added.
Existing management has a number of options in such proxy fight, he noted, including padding the board.
"This should prove to be an interesting conflict. Loeb has the resources and arguments to make a serious play for Yahoo," Cadden said.
Yahoo did not respond to our request to comment for this story. [*Update - March 29, 2012]
*ECT News Network editor's note - March 29, 2012: In a statement provided to the E-Commerce Times by Yahoo spokesperson Lissa Perlman after this story was published, Yahoo said that it "has been moving aggressively to intensify its focus on delivering shareholder value -- reconstituting its Board of Directors and appointing a new CEO who is moving rapidly to re-shape the business. Unfortunately, Mr. Loeb rejected our efforts to bring Third Point's perspective into the board room through the offer of two board seats. Nevertheless, the Board made clear to Mr. Loeb that it remains open to hearing Third Point's ideas and to working constructively with Third Point, as with all of its shareholders.'"