Icahn: The Relentless Corporate Raider

Carl Icahn will aggressively seek a merger between Yahoo! and Microsoft, analysts say.
By Pia Sarkar ,

SAN FRANCISCO -- The one thing everyone can agree on about Carl Icahn: He is relentless.

It should come as no surprise then that the activist investor will do whatever it takes to force a merger between

Yahoo!

(YHOO)

and

Microsoft

(MSFT) - Get Report

, even though both companies have walked away from a deal.

"He's your worst nightmare," says Mark Stevens, chief executive of global marketing firm MSCO and author of

King Icahn

, an unauthorized biography on the larger-than-life billionaire. "He's also the smartest guy I've ever met in my life."

Icahn on Thursday informed Yahoo! that he has put together a slate of 10 candidates -- including himself -- to unseat the company's board of directors at the annual shareholders meeting July 3.

He roundly criticized Yahoo! for failing to reach a deal with Microsoft, which had put forth an offer of $47.5 billion but yanked it off the table on May 3 when the Internet giant demanded more money.

Yahoo! has defended its position, describing Icahn's characterization of the negotiations as "a significant misunderstanding of the facts about the Microsoft proposal and the diligence with which our board evaluated and responded to that proposal."

That will not be enough to placate Icahn, however, who is bent on seeing a deal go through despite the fact that Microsoft has shown no indication that it is willing to revive discussions, stating simply that it has "moved on."

He has already purchased 59 million shares and share-equivalents of Yahoo!, and has sought anti-trust clearance from the Federal Trade Commission to buy an additional $2.5 billion worth of stock.

To Icahn, who has made a lifelong career out of agitating companies to do what he wants, this stuff is child's play. His typical maneuver is to amass shares of a company before launching a proxy battle to affect change, which can come in any number of forms, such as a stock buyback program or, in the case of Yahoo!, a merger.

Just recently, he bought up a stake in BEA Systems, then strong-armed it into making a deal with rival

Oracle

(ORCL) - Get Report

.

Last year, after expressing frustration with

Motorola's

(MOT)

performance, Icahn lobbied for a seat on the board. Shareholders ultimately rejected him, but he still managed to come back and negotiate two out of four seats in a settlement with the company.

Not all his tactics have met with success. One of his biggest fumbles was with Trans World Airlines, which he took over in 1985 but lost control of eight years later. Early in his career, he was known more for his bullying than anything else, engaging in the practice of greenmailing, where he would buy shares of a company under the threat of a hostile takeover, then sell them back to the company at a premium.

One source, who has worked with Icahn several times and asked not to be named, described him as "sort of the dark side of Warren Buffett."

"Warren is more like a kindly old Geppetto whereas Carl is like the Terminator," he says.

He also says that Icahn is somewhat of a performer, barreling into boardrooms and making demands because that's how he gets results.

"I'm not sure that's not a studied, intentional persona," he says. "I think Carl does a lot of acting because it's effective."

Icahn's legitimacy is backed up by big moneyed supporters who pay into his hedge fund. And a glance at some of the candidates he's put up for Yahoo! shows the extent of his influence.

Among them are Frank Biondi, the former CEO of Universal Studios and

Viacom

(VIA) - Get Report

; Mark Cuban, the majority and controlling owner of the Dallas Mavericks basketball team; and Lucian Bebchuk, a Harvard Law School professor.

"Given the amount of money he can attract, that's the ultimate litmus test," the source says. "He is managing money for other people. And smart people don't put money in someone who can't deliver."

Jeff Lindsay, an analyst for Sanford Bernstein, says Icahn's bad guy image gets played up by the people he antagonizes, but at the same time, his actions often benefit investors who might lack his prowess.

"It's normally good news if he shows up," Lindsay says.

He adds that Icahn can cut through the corporate jargon that executives like to spew when defending their strategies.

"He's able to debunk it pretty effectively," Lindsay says. "It's a much overdue injection of reality."

Many observers agree, however, that Icahn tends to be in it for himself and any positive outcome to shareholders is usually incidental.

Already, he has seen a bump in Yahoo!'s stock since rumors emerged that he was considering a proxy battle. Shares have climbed 10%, closing at $27.66 on Friday. That's nearing the levels Yahoo! was trading at before Microsoft withdrew its merger offer.

Mark Stevens, the author of

King Icahn

, says Icahn is mainly interested in companies with hard assets that he can resell, not technology companies like Yahoo! Accordingly, Icahn will likely not stay in it for the long haul.

"If he quits tomorrow, he'll still have made money," Stevens says.

Loading ...