Icahn's Yahoo slate still attracting investors

By Michele Gershberg

NEW YORK (Reuters) - Yahoo Inc investors are showing more interest in an alternate board slate proposed by billionaire Carl Icahn that was first formed to deliver the company to Microsoft Corp in a now-defunct buyout.

With Microsoft out of the picture, it is not clear whether Icahn will reshape his proxy fight. But several investors say they would be willing to back some or all of his nine board nominees at a shareholder meeting on August 1, at the very least to show disappointment over the failed talks.

Increasingly, investors are citing a hybrid option that would put several of Icahn's candidates on the board to act as watchdogs, while preserving many of Yahoo's existing stewards.

Mark Nelson, a partner at Mithras Capital, which owns about 1.7 million Yahoo shares, said he would back Icahn's entire slate unless the current board took a dramatic about-face.

"We believe a truly independent board is what's needed at Yahoo and not one that has these obviously deep and emotional connections to the company," Nelson told Reuters.

"Yahoo could show good faith by having Jerry Yang resign as CEO and get a new person in there. In that scenario, a modified slate would make more sense."

A second shareholder, who asked to remain anonymous, agreed.

"He should go ahead," the investor said. "It's an indicator of the widespread dissatisfaction of shareholders with Yahoo's management and the board.