LOS ANGELES, July 21 (Xinhua) -- Internet giant Yahoo has settled a dispute with activist investor Carl Icahn on the makeup of the company's board, the company announced on Monday. Under an agreement between the two sides, Icahn will be placed on Yahoo's Board of Directors, and two other seats will be filled based on a list of nine candidates recommended by Icahn, Yahoo said.
Under the agreement, Yahoo co-founder Jerry Yang will remain chief executive and Roy Bostock will remain board chairman.
The move expands Yahoo's Board of Directors from nine to 11 members.
The agreement ends a showdown that had been slated for Yahoo's annual meeting Aug. 1, when shareholders would have voted on a rival slate of board members proposed by Icahn.
As part of the settlement agreement, Icahn, who owns an aggregate of 68,786,320 shares, or 4.98 percent of Yahoo common stock, has agreed to withdraw his nominees for consideration at the annual meeting and to vote his Yahoo shares in support of the Board's nominees.
This agreement will not only allow Yahoo to put the distraction of the proxy contest behind us, it will allow the company to continue pursuing its strategy of being the starting point for Internet users and a must buy for advertisers, Yang said.
Icahn also praised the compromise. In a written statement released by Yahoo, Icahn said: I am very pleased that this settlement will allow me to work in partnership with Yahoo's board and management team to help the company achieve its full potential.
But he said he continues to believe that the sale of the whole company or the sale of its search business in the right transaction must be given full consideration.
Robert Kotick, chief executive of video-game publisher Activision Blizzard, will step down from the board, Yahoo said. The other directors will keep their jobs, including Bostock, Yang, Ronald Burkle, Eric Hippeau, Vyomesh Joshi, Arthur Kern, Mary Agnes Wilderotter and Gary Wilson.
Icahn began his battle with Yahoo after the company rejected an offer by Microsoft originally valued at 44.6 billion dollars. Icahn wanted to replace Yang and the Yahoo board at the Aug. 1 shareholders meeting and had proposed nine candidates, including himself and Dallas Mavericks basketball team owner Mark Cuban.
Last week, after rejecting a second, joint offer from Microsoft and Icahn to buy its search business, Yang issued a letter to shareholders and called Icahn a corporate agitator with a short-term approach to his investments.
Although the compromise between Yahoo and Icahn ends the board dispute, it does not resolve the broader issue of whether Yahoo will negotiate a sale to Microsoft.
Scott Kessler and Jim Yin, information technology analysts with Standard Poor's Equity Research, said in separate notes to investors this morning that they believe a deal for Microsoft to buy Yahoo's search business or the entire company is less likely after the compromise.
Kessler recommended that investors hold on to Yahoo shares, and Yin recommended that his clients buy Microsoft share as the company will aggressively build its online service business through smaller acquisitions and organic growth.
Kessler said Monday's announcement came amid evidence that Yahoo's board was gaining momentum and Icahn losing it as the dispute headed for the annual meeting.