Loeb Says Yahoo Was ‘Absurd’ to Reject Him as Board Member

Yahoo! Inc. (YHOO) investor Daniel Loeb, who is lobbying to gain seats on the board, lashed out at the Internet company for spurning him as a director, saying it was operating in an “illogical Alice-in-Wonderland world.”

Yahoo Chief Executive Officer Scott Thompson told Loeb he wasn’t named a director because he “would not be additive to the board” and would be “conflicted” because he’s a large shareholder, according to an open letter Loeb sent to Thompson. Earlier this week, Yahoo (YHOO) announced it was adding three new directors -- a group that didn’t include Loeb or any of his nominees.

“Only in an illogical Alice-in-Wonderland world would a shareholder be deemed to be conflicted from representing the interests of other shareholders because he is, well, a shareholder too,” Loeb, CEO of New York investment firm Third Point LLC, said in the letter. “This sentiment further confirms that Yahoo’s approach to board representation is ‘shareholders not welcome.’”

Thompson, who took charge in January, shook up the board amid mounting pressure from investors to make changes at the struggling company. Third Point, which owns about 5.8 percent of Yahoo, wasn’t satisfied with the move and is pushing ahead with plans to wage a proxy fight. The firm is seeking a shareholder vote on a slate of four new directors, including Loeb.

Photographer: Paul Sakuma/AP Photo

The company logo is displayed at Yahoo headquarters in Sunnyvale, Calif. Yahoo Inc. picked PayPal chief Scott Thompson as its CEO in January 2012, and he is changing the board. Close

The company logo is displayed at Yahoo headquarters in Sunnyvale, Calif. Yahoo Inc.... Read More

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Photographer: Paul Sakuma/AP Photo

The company logo is displayed at Yahoo headquarters in Sunnyvale, Calif. Yahoo Inc. picked PayPal chief Scott Thompson as its CEO in January 2012, and he is changing the board.

Board Negotiations

Yahoo (YHOO) said earlier this week that the board had offered to add one of Third Point’s nominees, Harry Wilson, and another member that both sides could agree to. Loeb rejected the proposal and refused to back down from the dispute unless he himself was named a director, Yahoo said.

“Yahoo has been moving aggressively to intensify its focus on delivering shareholder value,” the Sunnyvale, California- based company said today in a response to Loeb’s letter. “Unfortunately, Mr. Loeb rejected our efforts to bring Third Point’s perspective into the boardroom through the offer of two board seats. Nevertheless, the board made clear to Mr. Loeb that it remains open to hearing Third Point’s ideas and to working constructively with Third Point, as with all of its shareholders.’”

Yahoo reached out to Third Point on the nominees to avoid the “cost and distraction that inevitably accompanies a proxy fight,” the company said earlier this week. Still, the board determined that other nominees were more qualified than Loeb to be a director, Yahoo said.

Third Point remains willing to work with the company, according to today’s letter from Loeb.

“By seeking four seats, Third Point does not look to control the board, and any individual voice in the room would be only one of 11 or 12,” Loeb said. “It is absurd to assert a ‘conflict’ that would render a board member unqualified based either on ownership or a sense of urgency to repair a company that has been -- by your own admission -- languishing for years.”

Yahoo shares fell less than 1 percent to $15.32 today. The stock has declined 5 percent this year.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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