Time to play let’s pretend. Assume that Carl Icahn wins his proxy fight and installs his board at Yahoo! with the express intent of selling the company to Microsoft. But what if Microsoft, which does not currently have an offer on the table, isn’t interested, even at $31 or $33 a share?
I don’t think this is all that far-fetched. Microsoft CEO Steven Ballmer withdrew the offer to buy Yahoo! both because he faced serious opposition to the purchase within his own executive ranks and because of doubts about the damage a proxy fight would do to the company he was acquiring. Both those concerns still apply, even it it is Icahn leading the proxy fight rather than Ballmer.
Though I doubt there would be many tears shed if Icahn and the arbs get burned on this deal, it could leave Yahoo! in truly desperate straits: owned by shareholders who don’t want it and no one interested in buying. Sort of like AOL.