July 17, 2008
Carl Icahn and Microsoft are "making misleading statements about their plans for Yahoo," Chairman Roy Bostock and CEO Jerry Yang said in a letter to Yahoo shareholders this week.
The scathing letter urged shareholders to re-elect current board members Aug. 1, and warned that "the iCahn-Microsft agenda ... will destroy stockholder value at Yahoo." The company took the proxy fight to a new level while telling shareholders that Icahn and Microsoft want to serve their own "narrow special interests, clearly not your interests."
The letter portrays Icahn as an agitator with a short-term investment approach who wants to recover his investment without regard to the interest of other shareholders. Bostock and Yang also said Icahn has "severely handicapped himself" in his ability to get a fair price from Microsoft because already indicated he plans to sell all or part of Yahoo to Microsoft.
"That fact, combined with his lack of an operating plan going forward, means that he will have no leverage to negotiate a fair deal with Microsoft. He has set himself up for failure," they said in the letter.
The pair said Icahn and his slate lack the knowledge to negotiate a complex restructuring of the large, innovative, high-tech company, and they lack the experience needed to manage and lead Yahoo while it awaits transaction approval for a year.
To illustrate that fact, the pair printed the following Wall Street Journal quote from Icahn: "Technology hasn't really been one of the things I've focused on too much before. ... It's hard to understand these technology companies."
The letter also accused Icahn and Microsoft of flip flopping, entering a marriage of convenience and creating an odd couple.
"Certainly Microsoft is a well-respected and successful company and we have been clear that we are fully prepared to do a deal with them," the letter stated. "But Microsoft's flip flops and inconsistencies over the past five months are so stupefying that one can only conclude that Microsoft was never fully committed to acquiring Yahoo." It said Microsoft either hasn't prioritized its online strategies or is more interested in "destabilizing a key competitor to enhance its competitive position" or buy Yahoo for less than the company is worth.
Representatives for Icahn were not immediately available for comment. A representative for Microsoft said the company had no immediate comment.
The attacks come after Icahn issued a press release (PDF) telling Yahoo stockholders that he has never seen a company distort and twist the facts the way Yahoo has. He said his latest proposal would give stockholders $16.25 per share and guarantee at least $2.3 billion in revenue from search. Icahn provided some details of a proposal from Microsoft, and said Yahoo mischaracterized it while trying to ensure the current board remains. He also insisted that his interests are aligned with other shareholders, not Microsoft.
Microsoft also issued a statement saying Yahoo's communications contained several inaccuracies.
Bostock and Yang insisted that Yahoo's board has been consistent and clear while implementing changes to increase value. They said the board wants to sell the whole company to Microsoft for $33 per share, or more if Microsoft can provide certainty of value and closing. They said they would sell search only to Microsoft if the price is fair and if Microsoft removes operational risks associated with separating search and display. Finally, they said they would consider a potential spin-off of Yahoo's Asia assets to return cash to stockholders.
They said that strategy changes already underway could result in double-digit growth in cash flow.
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