Yahoo Parries Icahn's Jab
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|Carl Icahn turns up the heat on Yahoo.|
Quickly responding to billionaire investor Carl Icahn's broadside attack yesterday, Yahoo (NASDAQ: YHOO) said that his campaign to oust the company's board and force it to sell to Microsoft (NASDAQ: MSFT) showed a "significant misunderstanding of the facts" of the negotiations.
In an open letter to Icahn, Chairman Roy Bostock said that Yahoo's board had given the proposal a thorough consideration and acted in good faith on behalf of its shareholders.
"Following receipt of Microsoft's proposal on Jan. 31, our board of directors has met over twenty times to review Microsoft's proposal and Yahoo's other strategic alternatives," Bostock wrote. "Throughout this process our board kept an open mind and an open ear."
In his letter, Bostock said that Yahoo's current board is the best group of people to lead the company going forward.
He also pointed out that Icahn's proxy war would attempt to lead the company to accept an offer that is no longer on the table.
Bostock's letter contained the most detailed exposition of Yahoo's response to the acquisition bid that the company has made public to date. He said that Yahoo's representatives had met with Microsoft on seven occasions to discuss the proposed merger, addressing the prospects of integrating the two companies and winning regulatory approval of the transaction.
He also responded to Icahn's charge that Yahoo's failure to act on behalf of its shareholders was "unconscionable," saying that Yahoo's directors had met with some of the largest investors to discuss the merger.
A spokeswoman for Icahn declined to comment.
Microsoft's original offer of $31 per share represented a 62 percent premium for Yahoo based on its value at the time. Negotiations broke down earlier this month when Microsoft raised its offer to $33 per share and Yahoo made a counter proposal of $37.
Microsoft pulled its bid off the table and top executives had said publicly that the company was moving on.
Staying the course
Meanwhile, Yahoo has continued with its ambitious turnaround strategy as it attempts to demonstrate that it doesn't need Microsoft's money to deliver value to the shareholders.
Today, the company announced a partnership with WPP, one of the world's largest ad-agency holding companies. Through the deal, WPP's agencies will be able to sync up with Yahoo's Right Media Exchange -- a service facilitating transactions between ad buyers and publishers -- to sell targeted ads online.
Yahoo will also help WPP build its own online marketplace, giving the company's agencies access to more online inventory.
Jerry Yang, Yahoo's CEO, also sent an internal memo to the company's executives and one to all employees to reassure them that the company was healthy and profitable and dismiss the Icahn distraction.
Yang urged employees to stay focused on the company's goals of "transforming the experiences of our users, advertisers, publishers and developers," a phrase he used three times in the companywide message.
The next six weeks promise to be a heady time for Yahoo. Investors will be weighing the company's prospects in anticipation of the annual meeting July 3, when shareholders will vote either to reelect the current 10 member board or Icahn's rival slate.
Even if Icahn could deliver his board, whether Microsoft would be willing to reenter negotiations remains an open question. Microsoft has made no public statement on the matter, and declined to comment for this story.
Investors might be looking for some kind of indication that the software giant is still willing to deal before voting to unseat Yahoo's board.
Even without a formal sign that a deal is still in the cards, Icahn still might be able to sway angry shareholders frustrated by Yahoo's stonewalling, said Richard Rafferty, a corporate and securities attorney and partner with the Texas-based firm of Strasburger and Price.
"In proxy contests, incumbents usually win, but I think this situation is pretty ripe for the dissident slate," Rafferty told InternetNews.com. Even if Icahn does not succeed in ousting the entire board, he could still score a partial victory that might bring Yahoo closer to a deal on Microsoft's terms.