The Fight For Yahoo

Corporate raider extraordinaire Carl Icahn launched his strategy to push Yahoo! back into Microsoft's arms.

In a letter delivered Thursday to Yahoo!Chairman Roy Bostock, Icahn presented an alternative slate of board members to be voted on at the company's annual meeting on July 3. Icahn is on the 10-man list; so, too, is Internet entrepreneur Mark Cuban and entertainment mogul Frank Biondi.

Icahn also said he purchased 59 million shares of Yahoo!, totaling more than $1 billion and giving him a 4.3% stake in the company. He also said he is seeking clearance from the Federal Trade Commission to acquire up to $2.5 billion of Yahoo! stock. Here's what Icahn's moves mean and what's next.

Why is Carl Icahn doing this?
This official answer: Icahn said a number of shareholders asked him to lead a proxy fight to remove Yahoo!'s board and establish a new board that would negotiate a buyout deal with Microsoft. On Jan. 31, the Redmond, Wash., software giant made an unsolicited bid of $31 per share for Yahoo!. Yahoo! rejected that offer several times. Earlier this month, Microsoft increased its offer by $2, to $33 per share, but Sunnyvale, Calif.-based Yahoo! rejected the new offer, saying it wanted Microsoft to hike it to $37. Microsoft said it couldn't offer more than $33 and dropped its bid on May 3.

The unofficial answer: This is what Icahn does for a living. He goes into troubled companies and shakes things up. He has launched many proxy fights over the past 30 years and has enriched many shareholders—himself included. With a net worth of $14.5 billion, Icahn is ranked 18th on Forbes's list of the wealthiest Americans.

Who are the 10 proxy board members?
Icahn, Keith Meister, vice chairman of the board at Icahn Enterprises; Edward Meyer, former chief executive of Grey Global Group; Brian Posner, founder of the Hygrove Partners hedge fund; Robert Shaye, chief executive of New Line Cinema; Lucian Bebchuk, Harvard Law School professor; Frank Biondi, former chief executive of Universal Studios; John Chapple, co-founder of Nextel Partners; Mark Cuban, founder of Broadcast.com and owner of the Dallas Mavericks basketball team; and venture capitalist Adam Dell, brother of computer king Michael Dell.

What is Icahn trying to accomplish?
Icahn is trying to get Yahoo! and Microsoft back to the negotiating table to work out a deal. His goal, of course, is to cash out of Yahoo!'s stock with a profit. Icahn paid about $26 a share for his 59 million Yahoo! shares. If, for instance, he could get Microsoft to pay its last bid for Yahoo!—$33 a share—Icahn could walk away with a cool $400 million for his trouble.