How Marissa Mayer Kicked Dan Loeb Off Yahoo's Board

Earlier this year, Yahoo made a surprising announcement: Dan Loeb was stepping down from the company's board, and Yahoo was buying 40 million of its shares from his hedge fund.

Loeb, more than any other person, is responsible for the rejuvenation of Yahoo. He got Scott Thompson fired, and Marissa Mayer hired as CEO.

At the time, it looked like Loeb was just cashing in and leaving. His firm earned $1 billion on the sale of its Yahoo stock, which is an excellent haul for a little over a year's worth of work.

It turns out Loeb didn't just up and leave. According to a new report by Bethaney McClean in Vanity Fair, Mayer outmaneuvered Loeb, and essentially pushed him out of the company.

When Loeb decided he wanted to sell, he told Mayer he was planning on selling 20 million Yahoo shares, or a third of his stake in the company. Mayer countered by saying Yahoo would buying 40 million shares at $29.11 per share.

Mayer's offer was advantageous for Loeb in that he got $29 per share locked in. If he went to the open market and started selling, there was no guarantee that he would get that price. (McLean says Loeb planned to sell if Yahoo got in the $25-$30 range.)

Indeed, Yahoo's stock dropped 5% on the news that Loeb was cashing out.

At the time, our Henry Blodget argued that this was almost insider trading: "Third Point is getting the pre-resignation price for its stock, while knowing about the upcoming board member resignations. And the rest of us Joe Schmo Yahoo shareholders, who didn't know about the resignations, are now getting the post-resignation price."

He added, "I am sure that this deal was lawyered out the wazoo. So I'm sure there's some innocent explanation. But until I hear that explanation, I will be scratching my head."

There is an explanation, but it's not so innocent.

When Loeb said he wanted to sell, Mayer saw an opportunity to get rid of Loeb. By selling 40 million shares, Loeb's ownership of Yahoo dropped below 2% and he forced off the board.

Why would Mayer want to get rid of Loeb? Because, like any good CEO, she wants absolute control over her company. Dumping Loeb gave her that control.

An industry executive explained it best to McLean, saying, "She dodged a bullet ... I thought she and Dan were going to go sideways. He would have fired her. Both are extreme alphas. Dan was going to turn at some point. She ran the first gauntlet. She got him out. Dan had a gun to her head whether she knew it or not, and she orchestrated his departure."

In other words, Loeb and Mayer may have gotten along initially, but that would not last. At some point, Loeb was going to be angry with Mayer. As a board member he could have made her life miserable.

Before that could happen, Mayer pushed him out of the way, and now Yahoo is all hers to run as she sees fit.