general financial

Yahoo yesterday won an important supporter in its fight against activist investor Carl Icahn as one of the company's biggest shareholders said he expected to back the existing board at the company's annual meeting on August 1.

While not saying that a final decision had been made, Bill Miller, chief investment officer of Legg Mason, said that it was his firm's "intention" to vote its 4.4 per cent stake in Yahoo in favour of the company's existing board, rather than the alternative slate of directors being proposed by Mr Icahn.

However, he also issued a veiled invitation to Microsoft to make a renewed offer to acquire Yahoo, while also keeping up the pressure on Yahoo to reach an accommodation with Mr Icahn to bring some of his nominees on to its board of directors.

Other shareholders have also said privately that they will not vote for Mr Icahn's slate of directors as things currently stand, though Mr Miller's intervention is the most significant yet.

Mr Icahn's hand appeared to be strengthened at the start of last week when Microsoft said that, if he won control of Yahoo, it would be prepared to start new negotiations over buying Yahoo's search business, or even acquiring the whole company.

However, that vague promise has not been enough to win over Yahoo shareholders. One large investor said that he would not back Mr Icahn at the shareholder meeting unless the activist investor could prove he already had definitive terms for a deal.

Mr Miller said yesterday: "If Microsoft wants to acquire Yahoo, it can make the terms and conditions of its offer public." Mr Miller was among the shareholders to have publicly expressed their unhappiness when Yahoo let an earlier offer from Microsoft slip through its fingers. He said of any future Microsoft offer: "If Yahoo shareholders support it, I am confident the board of Yahoo will accept it."

If Microsoft does not come forward with a new offer before the meeting, Yahoo faces pressure to give at least some ground to Mr Icahn by bringing fresh blood into its boardroom. Adding to that yesterday, Mr Miller said he supported the idea that big shareholders should be represented on company boards, and that Mr Icahn's nominees have relevant experience.

Microsoft has continued this week to press an offer to buy only Yahoo's search business. Yahoo's board rejected that idea last weekend, denouncing it as part of a broader plan that would also involve Mr Icahn taking control of the company. Microsoft has distanced itself further from Mr Icahn, saying that its search offer is not dependent on any changes in Yahoo's board.

Credit: By Richard Waters in San Francisco