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Shareholder Icahn Has History Of Activism
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Shareholder Icahn Has History Of Activism

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Shareholder Icahn Has History Of Activism

Shareholder Icahn Has History Of Activism
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Yahoo and the nation's most famous activist investor, Carl Icahn, have reached a deal that will end the high-stakes proxy fight for control of the Internet company. Icahn has a record of trying to push corporate executives to do what they don't want to.

MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

ROBERT SIEGEL, host:

And I'm Robert Siegel.

An agreement today that will end an acrimonious battle for control of Yahoo. Investor Carl Icahn was trying to take over the board of directors and get Yahoo to sell to Microsoft. With today's deal, Icahn gets three seats on the board including one for himself. It is a victory of sorts for Yahoo's CEO, who will remain in charge, but it also reflects Icahn's clout.

NPR's Wendy Kaufman has this profile of the 72-year-old billionaire.

WENDY KAUFMAN: Carl Icahn is one of the richest men in America and one of the most feared by CEOs. When Icahn hones in on a company, he's usually up to change it, buy it, break it up, restructure it, and often oust the chief executive. In the process, he's made billions for himself and other investors. Fortune magazine says he may be making more money for shareholders than anyone else on the planet.

Icahn doesn't spend a lot of time talking to reporters, but in a recent "60 Minutes" interview with Lesley Stahl, he summed up his business this way.

(Soundbite of show "60 Minutes")

Mr. CARL ICAHN (Billionaire Investor and Corporate Raider): I make money, nothing wrong with that. That's what I want to do. That's what I'm here to do. That's what I enjoy.

KAUFMAN: He's been doing it for three decades. Back in the 1980s, Icahn became known as a ruthless corporate raider, buying sizeable stakes in companies such as Philips Petroleum and TWA. Often, companies would pay him so-called greenmail just to make him go away. Back then, he was a bit of a lone wolf; today, he has a staff of 40 or so. But Icahn's fundamental investment philosophy has remained the same.

Wharton professor Mike Useem says Icahn picks his investment targets carefully.

Prof. MIKE USEEM (Management, Wharton School, University of Pennsylvania): He does have ideas on how companies ought to be run especially if the management could really use some fresh ideas. He doesn't just go after anybody. He does go after companies he thinks are undervalued or at a spin-off in enterprise.

KAUFMAN: In the case of Yahoo, Icahn is frustrated with management's refusal to make a deal with Microsoft. Microsoft made a buyout offer that represented a sizeable premium over Yahoo share price. Icahn thought Yahoo's management team had blown it. The billionaire went to work.

Mr. ICAHN: You know the aggressive action-oriented investor.

KAUFMAN: Wally Scott, a professor at the Kellogg School of Management at Northwestern University says, Icahn tries to push, even embarrass, corporate executives into doing things they don't want to do. He's come to symbolize a relatively new class of investor, the so-called activist investor.

In some cases, Icahn tries to work collaboratively with managers to get the changes he wants. In other cases, he launches an all out assault, a proxy fight to replace the entire board of directors. Until today, that was his strategy at Yahoo.

Ron Orol, who's written a book about activist hedge fund managers, says Icahn sometimes gets his way just by threatening a proxy fight.

Mr. RON OROL (Author, "Extreme Value Hedging: How Activist Hedge Fund Managers Are Taking on the World): In September 2007, he bought an 8.5 percent stake of the BEA Systems, a software company. And this one is one - probably one of the shortest activist campaigns I've seen.

KAUFMAN: He wanted to see BEA Systems sold to Oracle Corporation. BEA had rebuffed an earlier offer as too low. But within four months, BEA was sold to Oracle. Icahn's profit? About $300 million. But in the case of Yahoo, Icahn didn't get everything he wanted, at least, not yet.

Mark Mahaney, an analyst at Citigroup, calls the deal - in which Icahn dropped the proxy fight in exchange for three seats on Yahoo's board - a muddy compromise.

Mr. MARK MAHANEY (Analyst, Citigroup): There's a surprise here, given the level of public antipathy between Yahoo's board and Mr. Icahn, it's surprising that they were able to reach an agreement which actually brings Icahn right on to the board.

KAUFMAN: Proxy fights are always risky and they often devalue the very asset the two sides are fighting over. So, in this case, Yahoo gave up some seats and, as Mahaney notes, Icahn gave up the chance to take control over the entire board of directors.

Mr. MAHANEY: From Icahn's perspective, it's probably something of a concession to the point that he probably could not win all of the board seats and getting something was better than nothing.

KAUFMAN: Yahoo's co-founder and CEO, Jerry Yang, will remain at the helm, but Yang will have a powerful new rival sitting on his corporate board.

Wendy Kaufman, NPR News.

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