Major shareholder supports Yahoo CEO against Carl Icahn

Bill MillerAnother stunning new development in the ongoing Yahoo-Microsoft-Google saga – one of Yahoo's biggest shareholders endorsed the company's incumbent board of directors on Friday, marking a stunning blow to billionaire Carl Icahn's campaign to take over the beleaguered Web portal.

Legg Mason Capital Management Chairman and CEO Bill Miller announced plans to back current CEO Jerry Yang and his management team in the upcoming annual general meeting on 1 August. However, neither of the affected parties – Miller, Icahn or the Yahoo management – has commented further on the issue.

Legg Mason, which owns 4.4 per cent of outstanding Yahoo stock, is the first large shareholder to publicly support the board, improving Yang's chances of staying in power. Icahn has recruited BP Capital LLC chairman T Boone Pickens and hedge-fund manager John Paulson in his campaign to unseat the directors and force Yahoo to strike a deal with Microsoft Corp., which wants to buy Yahoo's search business.

"We believe the current Board acted with care and diligence when evaluating Microsoft's offers," Miller said in a prepared statement. "We believe the Board is independent and focused on value creation for long-term shareholders." He also called on both Yahoo and Icahn to "reach a mutual agreement on the composition of the board and end this disruptive proxy contest."

With roughly 60.7 million Yahoo shares, Legg Mason is Yahoo's second largest shareholder after Capital Research & Management Co. The latter owns roughly 16 per cent of the company's outstanding shares through its Capital Research Global Investors and Capital World Investors concerns.

Miller also appeared to reject one of Icahn's central arguments in his campaign, namely that Microsoft CEO Steve Ballmer made it clear to Icahn that the software giant would only negotiate with a new board.