Yahoo’s Nightmare: Proxy Fight Ensnares New CEO

New Yahoo CEO Scott Thompson faces a new nightmare: activist shareholder Third Point Capital has upped its holdings and launched a proxy battle to control the company.

Late Tuesday, New York-based Third Point, controlled by Daniel Loeb, filed its intentions with the U.S. Securities and Exchange Commission. Loeb wants to scratch four new directors announced last week and replace them with himself and three confederates.

Since CEO Carol Bartz, 63, was fired from Sunnyvale, Calif.-based Yahoo last September, Loeb, 50, started buying Yahoo shares and sending letters to lame-duck Chairman Roy Bostock demanding the company enhance shareholder value.

Loeb disclosed he's boosted his Yahoo holdings to about 6 percent. He also wants to mount a proxy battle to elect former NBCUniversal boss Jeff Zucker, hedge fund executive Harry Wilson and Activate CEO Michael J. Wolf with himself to the board.

Yahoo, in a statement, termed Loeb's moves disappointing and added he'd taken a potentially distruptive path. Yahoo is the No. 2 search engine behind Yahoo, but its market share is only about 15 percent compared to more than 50 percent for Google, the leader. In the past, activist Carl Icahn mounted a similar fight at Yahoo and won himself a board seat, which he quit after Bartz was brought in as CEO.

The announcement came after sources said plans by Thompson, 52, at Yahoo only six weeks, to sell its 40 percent interest in China's Alibaba Group and 35 percent interest in Yahoo Japan, had faltered.

Yahoo has hired Goldman Sachs and Allen & Co. to advise on strategy, which reportedly called for these interests, valued as much as $20 billion, to be divested into tax-free vehicles.

Yahoo shares fell 24 cents to close at $15.12 Wednesday. They fell as much as 7 percent Tuesday on news of the Asian deal complications.

In response to Loeb, Yahoo co-founder Jerry Yang, 43, resigned from the board last month. Thompson last week installed two new directors immediately and said at least two more would be sought before the annual meeting, whose date hasn't been fixed yet.

Yahoo's market value is $18.8 billion. Since Bartz's ouster, its value has gained nearly 20 percent.