A proxy battle to realign Yahoo’s (NASDAQ:YHOO) board of directors could begin in the next few days unless the Internet company submits to the demands of a key shareholder.
Third Point LLC, a hedge fund that holds a 5.8 percent stake, Wednesday issued a letter to Yahoo’s chief executive Scott Thompson.
The letter comes a month after Third Point first announced that it wanted four seats on a Yahoo board already undergoing an overhaul.
Yahoo’s board currently consists of 11 directors, but chairman Roy Bostock and three other members announced they will step down at Yahoo’s annual meeting. The departures are part of an attempt to calm shareholders frustrated with the stock’s poor performance.
Third Point believes Yahoo would fare better if its representatives sat on the board. Third Point’s proposed directors are: Daniel Loeb, the hedge fund’s manager; former NBC Universal chief executive Jeff Zucker; former MTV Networks executive Michael Wolf and turnaround specialist Harry Wilson.
Loeb told Thompson he was disappointed with Yahoo’s “dismissive” attitude toward Third Point’s candidates since the two men spoke in a Feb. 17 conversation.
“The board’s stonewalling, apparent insouciance and decision not to engage with us in a serious manner, has left us no choice but to directly approach our fellow owners” in an attempt to get Third Point’s slate elected as directors, Loeb wrote.
In a statement, Yahoo said its board’s nominating committee is still considering “a wide range of highly qualified candidates” for its board. The company appointed two new directors, Alfred Amoroso and Maynard Webb, to its board last month.
Unless Yahoo accepts Third Point’s candidates, Third Point pledged to begin his campaign in the next week which could lead to a showdown that culminates at Yahoo’s annual meeting due in late June.
Wednesday Yahoo began legal action against Facebook over patents used in the social network’s website.
Third Point is nominating four candidates for board seats, including Michael J. Wolf, former president and chief operating officer of MTV Networks, and Jeff Zucker, former chief executive of NBC Universal. The Third Point slate is rounded out with Loeb and Harry J. Wilson, chairman and chief executive of a corporate restructuring firm, Maeva Advisors.
Since last year, Loeb has pressured beleaguered Yahoo for mismanagement, calling for co-founder and “chief Yahoo” Jerry Yang, along with other board members, to step down. Last month, Yang resigned, and the company brought in former PayPal executive Scott Thompson as chief executive. And earlier this month, four directors, including Chairman Roy Bostock, said they would not seek re-election.
In the SEC filing, Third Point noted the changes but said they don’t put Yahoo on “the right track towards maximizing shareholder value.” Third Point criticized the two new directors–Alfred Amoroso and Maynard Webb Jr.–Yahoo has appointed to its board.
“Installing the handpicked choices of the current board does nothing to allay investor fears that Yahoo is poised to repeat the errors of its past,” Third Point wrote in its filing. It went on to say “recent changes do not demonstrate convincingly that board and shareholder interests are fully aligned, nor that this board has the fresh perspective and necessary experience to overhaul the company’s challenged organizational and operating structure.”
In the filing, Third Point expresses concerns that Yahoo is planning to emphasize technology “at the expense of advertising and media, which accounts for the vast majority of (Yahoo’s) revenues.” And it notes that the strategy is a direct result of “a dearth of essential expertise in media and entertainment at the board level.” That’s a shortcoming Third Point says it believes Wolf and Zucker would presumably address.
Ultimately, Third Point would like its nominees to serve on the board with existing Yahoo directors other than the four who retired earlier this month, the two newly appointed directors, and board member Patti Hart, who heads the nominating and corporate-governance committee.
Neither Yahoo nor Third Point immediately responded to requests for comment.
All Things Digital first reported the news of Third Point’s proxy fight.