The Work

September 9, 2011 12:02 PM

Willkie Advising Hedge Fund Taking Stake in Struggling Yahoo

Posted by Brian Baxter

UPDATE: 9/9/11, 4:20 p.m., EDT. Yahoo and AOL are reportedly in merger talks, according to several news sources.

New York–based hedge fund Third Point purchased a 5.2 percent stake in Yahoo Thursday, calling for changes to the embattled Internet giant's board a day after ex-CEO Carol Bartz's forced resignation.

Bartz's firing, coupled with the cash infusion from Third Point, helped push Yahoo's share price higher amid speculation that the Santa Clara, Calif.–based company could become a takeover target. The New York Times reports Yahoo has hired investment bank Allen & Company to evaluate its strategic options.

Willkie Farr & Gallagher corporate partner Michael Schwartz in New York is advising Third Point on its investment in Yahoo, according to SEC filings. Schwartz and Willkie have previously advised the hedge fund in proxy contests for TXO Resources, Pogo Producing, and Massey Energy.

Third Point chief compliance officer and deputy general counsel William Song's name also appears on Yahoo's SEC filing. Josh Targoff serves as Third Point's current chief operating officer and general counsel.

Hedge fund titan Daniel Loeb, known for his bold proclamations, founded and manages Third Point. Loeb is the son of California lawyer Ronald Loeb, a former partner at Irell & Manella.

In his letter to Yahoo chairman Roy Bostock, Daniel Loeb states that the current board "has made a number of decisions that have directly harmed the company and resulted in a stock price far below the company's intrinsic value."

Loeb specifically calls for the resignation of Bostock, who he claims "championed Ms. Bartz's hiring and led the charge against" a $47.5 billion bid for Yahoo by Microsoft three years ago. (Bostock reportedly fired Bartz over the phone earlier this week.)

Skadden, Arps, Slate, Meagher & Flom helped Yahoo fend off Microsoft's takeover bid. Yahoo general counsel Michael Callahan is a former associate at Skadden, which has a long-standing relationship with the company.

Yahoo isn't the only once high-flying tech company to hit the skids lately and be eyed as a possible takeover target. The Am Law Daily noted last month that AOL had retained Wachtell, Lipton, Rosen & Katz for what many market observers believe could be a forthcoming transaction.


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