The hedge fund manager Daniel S. Loeb took another swipe at Yahoo on Friday, demanding that the company’s co-founder, Jerry Yang, step down as a director for talking with private equity firms about helping him gain control of Yahoo.
In a letter to Yahoo’s board, Mr. Loeb, the chief executive of Third Point, also demanded two board seats and criticized the board’s “inability — or perhaps unwillingness — to properly solicit true strategic alternative bids” for the company. And Mr. Loeb indicated once again that he was willing to begin a proxy fight for control of the board.
Mr. Loeb’s letter comes after the private equity firm TPG Capital signed a nondisclosure agreement with Yahoo, making it one of the first potential bidders to begin formal due diligence work on the company, which is weighing a sale.
TPG is exploring making a minority investment in Yahoo, people briefed on the matter told DealBook. In one potential plan, these people said, the firm would buy perhaps a 20 percent stake in Yahoo, while Mr. Yang and another co-founder, David Filo, would roll in their roughly 10 percent stake in an effort to gain control of the company.
Mr. Loeb, whose hedge fund owns about 5 percent of Yahoo, objected to this proposal as well as any talks with other private equity firms.
“We are deeply concerned by news reports that you are considering a leveraged recapitalization that will allow private equity firms to gain substantial equity positions that will, when combined with Jerry Yang’s and David Filo’s ownership, effectively establish a controlling position in Yahoo,” Mr. Loeb wrote. “More troubling are reports that Mr. Yang is engaging in one-off discussions with private equity firms, presumably because it is in his best personal interests to do so.”
Late Friday, Yahoo responded to the letter by saying its board was acting for “the benefit of all shareholders” in its review of its strategic options. And it defended Mr. Yang’s role on the board.
“Mr. Yang is one of nine directors with the exact same fiduciary duties and motivation as all of his fellow directors — to serve the best interests of all the company’s shareholders,” Yahoo said in a statement. “The board and the transactions and strategic planning committee initiate, direct and oversee any work Mr. Yang undertakes in relation to the strategic review process.”
Mr. Loeb has been a persistent critic of the Yahoo board and the company’s performance. In September, he called for the resignation of the company’s chairman, Roy Bostock, and three other directors.
After that demand, Mr. Loeb said Mr. Bostock hung up on him when he tried to have a phone conversation with the chairman and Mr. Yang.
In his letter on Friday, Mr. Loeb criticized Mr. Yang for engaging in discussions with private equity firms that he said also included Providence Equity Partners, Silver Lake Partners, Kohlberg Kravis Roberts and the Blackstone Group.
And Mr. Loeb revisited Mr. Yang’s decision in 2008 to rebuff Microsoft’s $44.6 billion bid for Yahoo.
“The board and the strategic committee should not have permitted Mr. Yang to engage in these discussions, particularly given his ineptitude in dealing with the Microsoft negotiations to purchase the company in 2008,” Mr. Loeb wrote. “It is now clear that he is simply not aligned with shareholders.”