Yahoo's shares jumped to their highest level since Microsoft abandoned its takeover offer as expectations rose yesterday that the internet company was about to come under renewed pressure to consider a deal.
Carl Icahn, the activist investor, is considering proposing nominees to the company's board as a way to force Yahoo's hand, according to one investor who has worked as an ally with him on similar situations.
This investor, and other media reports, also claimed that Mr Icahn had amassed a stake of as much as 4 per cent of Yahoo's shares in preparation for a fight.
Yahoo has set a deadline of tomorrow for shareholders to propose alternative directors to be voted on at its annual meeting on July 3, leaving little time for organised opposition to emerge after Microsoft's surprise abandonment of its $46.5bn bid less than two weeks ago.
Although Mr Icahn has yet to show his hand and has not formally approached the company, Yahoo itself now believes the activist investor is likely to show his hand before tomorrow's deadline, according to a person close to the situation.
Yahoo's shares rose more than 5 per cent to $26.56 on expectations of a proxy fight, leaving them less than 8 per cent below the price they were trading at before Microsoft dropped its offer.
Mr Icahn has been sounding out other potential allies among hedge fund managers for more than a week, according to the investor. This person said any campaign against Yahoo's board would rest heavily on support from big shareholders such as Legg Mason and Capital Group, who last week expressed their anger at Yahoo's failure to agree a deal with Microsoft.
Another investor who has worked closely with Mr Icahn said declarations from these shareholders that they would have accepted $34-$45 for their shares had sent a clear signal, greatly streng-thening Mr Icahn's hand.
Mr Icahn is unlikely to try to take full control of the Yahoo board but would nominate directors so he could push for leadership change, according to this person.
Mr Icahn did not return calls for comment, and a spokesperson for Yahoo refused to comment.
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