Icahn Steams Ahead With Proxy Rhetoric


As billionaire investor Carl Icahn attempts to force a sale of embattled search company Yahoo (NASDAQ: YHOO) to Microsoft (NASDAQ: MSFT), the exchange between the tycoon and Yahoo, whose board of directors he is trying to unseat, has become more spirited.

Icahn’s latest missive, dated today, charged Yahoo Chairman Roy Bostock with the disingenuousness of a politician for repeating the same spin enough times in the hope “that it will convince your shareholders that these misstatements are valid.”

“While you may take issue with the content of my letter, I take issue with your oversight of Yahoo,” Icahn wrote to Bostock.

Yahoo quickly issued a statement suggesting that Icahn’s characterization of the company’s response to Microsoft’s bid was “inaccurate” and that he had offered “no credible plan to operate Yahoo.”

Yahoo, of course, has been at the center of a dramatic four-month soap opera since Microsoft made its bid public on Feb. 1. Buyout talks between the two companies ended on May 4, when Microsoft took its bid off the table after Yahoo sought a higher price than it was willing to offer.

Icahn is now seeking control of the board at Yahoo’s shareholder meeting on Aug. 1 through a proxy war, with the ultimate goal of positioning the company in such a way to entice Microsoft back to the table.

In the letter, Icahn renewed his gripe with the severance packages Yahoo adopted in February.

Employees would receive the severance arrangements if a change occurs in the company’s ownership. Icahn called the severance plan a “poison pill” that could cost any acquirer in excess of $2.4 billion.

“Again, I stand by my characterization of your ‘poison pill’ severance plan, and I find it humorous to see you attempt to defend it,” Icahn wrote.

In his response to Icahn’s earlier letter, Bostock had said the severance package was not a poison pill and that retention was part of the plan, since employees who would simply quit without a valid reason in the event of a takeover would not be eligible.

Were he to win his proxy war, Icahn said he would dispense with the severance plan, which he characterized as a deterrent to any potential acquirer.

Icahn also reiterated that he had no confidence in Jerry Yang, Yahoo’s chief executive.

“Second, I intend to ask our new board to hire a talented and experienced CEO (attempting to replicate Google’s success with Eric Schmidt) to replace Jerry Yang and return Jerry to his role as ‘Chief Yahoo,'” he wrote.

Given Icahn’s stated goal of facilitating a sale to Microsoft, the willingness of the software giant to renew acquisition talks could be a crucial factor in shareholders’ willingness to vote for his dissident slate of directors.

So far Microsoft has said that it continues to discuss some form of partnership with Yahoo, but that it will not actively pursue an outright purchase.

Icahn said that he would seek to cut off any talks with Microsoft about an alternative transaction, unless the parties agreed to boost Yahoo’s stock price to $33, a contingency that Icahn views skeptically. As of this writing, Yahoo was trading at $26.83.

Unsatisfied with a limited partnership, Icahn said that he would ask the new board to make a public offer to sell the company to Microsoft at the set price of $34.375 per share in “a friendly and cooperative transaction.”

Yahoo responded that such a move would be “ill-advised,” and that it was open to a sale to Microsoft or anyone else at a price that would maximize value for the shareholders.

Finally, Icahn suggested if Microsoft was uninterested in a deal, he would call on the new board to strike a deal with Google to outsource its search advertising.

Such a deal would contain a termination clause in case Microsoft’s interest in a buyout was rekindled. Yahoo had conducted a brief and limited search-ad trial with Google, and Microsoft had cited a potential alliance of those two companies as one of the reasons it withdrew its offer.

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