Will Icahn try to force a Yahoo deal?

Proxy fight, drive for new talks with Microsoft possible

NEW YORK - Carl Icahn is considering running a proxy campaign to elect new board members at Yahoo Inc. now that the company has failed to forge a deal to merge with Microsoft Corp, sources close to the matter said yesterday.

Icahn has built up a stake in Yahoo and would run a slate in an effort to force the company back to the negotiating table with Microsoft, the sources said, asking for anonymity because the decision to go ahead with the move has not yet been made.

It is unlikely that Icahn, an investor who is a veteran of numerous proxy battles, will join with other hedge funds in the campaign, the sources said.

A lawyer who has worked with Icahn in previous campaigns said such a campaign could have good odds of success, providing Microsoft is willing to come back to the bargaining table, which he said is probable.

"The odds are pretty decent," said Marc Weingarten, who said he is not currently involved in any plans for a Yahoo proxy campaign.

"Yahoo has a lot of unhappy shareholders. And if someone could press the company in getting something done, I would think there is a decent chance at a transaction."

A hedge fund manager who heads a large activist fund said it is "a likely possibility" that Icahn would run a Yahoo campaign. The manager, who has worked with Icahn on previous campaigns, asked to remain unnamed.

Icahn declined to comment.

Microsoft walked away from its bid to buy Yahoo this month after the Internet company turned down its offer to raise its price by $5 billion to $47.5 billion, or $33 per share. Yahoo demanded $37 per share.

Icahn could be in a position to force the companies to restart the talks. Not only does he have the financial resources needed for a proxy campaign, he also has experience in pressuring companies back to the bargaining table.

Last year, for instance, Icahn got Oracle Corp. to return to negotiations to buy BEA Systems after those talks collapsed.