REFILE-UPDATE 2-Yahoo to buy back 40 mln shares from Third Point
(Adds "per share" to first paragraph)
* Shares drop nearly 5 percent
* Yahoo stock surged more than 80 percent in last 12 months
* Third Point will still own about 20 million shares
July 22 (Reuters) - Activist hedge fund Third Point LLC reached an agreement to sell two-thirds of its stake in Yahoo Inc back to the company for $29.11 per share on Monday, sending shares of the Internet company down nearly 5 percent.
Three Yahoo board directors appointed by Third Point, including Daniel Loeb, the hedge fund's chief, will resign from Yahoo's board. Third Point will still own about 20 million shares, less than 2 percent of the Internet media company's common stock.
Third Point's decision to sell shares of Yahoo comes as the struggling Internet's company's stock has surged more than 80 percent during the past 12 months, due largely to aggressive share buybacks and the value of Yahoo's Asian assets.
It was not immediately clear why Third Point was selling its shares now. Third Point declined to comment, but Loeb expressed his confidence in Yahoo's prospects in a statement on Monday.
Given the gains in Yahoo's shares, Third Point may have decided it was prudent to sell some of its holdings, said JMP Securities analyst Ronald Josey.
But Loeb's move may be prompting other shareholders to similarly re-evaluate their investment, he said.
"Probably a lot of investors are saying 'We had a pretty good run here, it makes sense to take some off the table,"' Josey said, adding, "Much like a lot of investors followed Third Point in, a lot will follow Third Point out."
Yahoo, which plans to fund the Third Point transaction primarily with cash, said it would increase earnings per share.
After the deal, about $700 million will remain under a $5 billion overall buyback authorization that Yahoo announced last year.
Third Point settled a bitter proxy battle with Yahoo last year after months of criticising the company. Loeb was instrumental in selecting former Google Inc executive Marissa Mayer to join Yahoo as CEO.
The resignations of directors Loeb, Harry J. Wilson, and Michael J. Wolf were part of Yahoo's settlement with Third Point in May 2012, Yahoo said.
Yahoo shares fell 4.3 percent, or $1.25, to $27.86 on Nasdaq in midday trading.
(Additional reporting by Sinead Carew; Editing by Jeffrey Benkoe and Leslie Gevirtz)