Icahn loads Yahoo proxy slate with Mark Cuban, other biggies

This post was updated at 9:30 a.m. PDT with Microsoft's comment and portions of Icahn's letter.

Billionaire investor Carl Icahn is leaning on such high-profile tech names as Mark Cuban in his effort to unseat Yahoo's current board at its annual shareholders meeting and to pave the way for a Microsoft-Yahoo merger.

Icahn, in formally announcing on Thursday his 10-member proxy slate to run against Yahoo's current board, lists Cuban, founder of Broadcast.com, owner of the Dallas Mavericks, and chairman of HDNet, as one of his dissident directors. Ironically, Cuban sold Broadcast.com to Yahoo for $5.04 billion in 1999.

Cuban, as well as the other members of Icahn's A-team, are seeking to oust Yahoo's entire board, which is up for re-election to a one-year term at the annual shareholders meeting on July 3.

Icahn is using his 10-member slate to pressure Yahoo to reignite buyout talks with Microsoft, which walked away less than two weeks ago, after upping its unsolicited buyout bid to $33 a share and receiving a tepid response from Yahoo.

In a letter to Yahoo chairman Roy Bostock, Icahn said:

"It is quite obvious that Microsoft's bid of $33 per share is a superior alternative to Yahoo's prospects on a standalone basis. I am perplexed by the board's actions. It is irresponsible to hide behind management's more than overly optimistic financial forecasts. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72 percent premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer."

"During the past week, a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched."

Should Icahn succeed in having his proxy slate elected, the newly minted board would likely move to have Yahoo's anti-takeover measure, known as a shareholders rights plan, or "poison pill," removed. Yahoo's poison pill would flood the market with additional shares of the company, should an unwanted buyer's stake exceed a certain threshold, making it prohibitively expensive to acquire the company.

While Microsoft has been busy sending out the message that it has moved on, industry observers, analysts, and investors say the two companies need each other as they struggle to catch up with archrival Google. For Microsoft, a merger could boost its lackluster Internet service and ad efforts. And for Yahoo, it could bolster its efforts in the search advertising space.

Unless Microsoft steps back into the fray with a firm buyout offer, Yahoo investors will be asked to elect Icahn's proxy slate on the hope and faith that Microsoft will return to strike a deal. Proxy solicitors say that such a leap of faith presents a sizable challenge for any proxy contest.

Microsoft declined to comment. Yahoo was not immediately available for comment.

At least two names associated with Microsoft's proxy slate--when it was weighing the merits of going hostile against Yahoo--have been added to Icahn's group: John Chapple, president of Hawkeye Investments, a privately owned equity firm based near the Redmond giant, and Edward Meyer, chief executive of investment management company Ocean Road Advisors and former CEO of advertising powerhouse Grey Global Group.

And no proxy slate would be complete without representatives from corporate governance, finance, and industry. Icahn has fit that bill with:

• Lucian Bebchuk, director of the corporate governance program at Harvard Law School.

• Robert Shaye, founder and co-CEO of New Line Cinema.

• Frank Biondi Jr., senior managing director of investment advisor WaterView Advisors and former chairman and chief executive of Universal Studios.

• Adam Dell, managing general partner of information technology venture capital firm Impact Venture Partners.

• Brian Posner, a private investor and former CEO of ClearBridge Advisors, an asset management company and wholly owned subsidiary of Legg Mason.

Bringing up the rear are old Carl Icahn himself and business associate Keith Meister, principal executive officer and vice chairman of Icahn Enterprises.

If history repeats itself, Icahn has a good chance of striking up another win in his latest proxy fight. Of the 18 proxy fights he's engaged in since 1994, he's won 10, according to FactSet SharkWatch.