Billionaire investor Carl Icahn continued his epistolary shouting match with Yahoo Chairman Roy Bostock on Monday with a letter in which he urges Bostock to justify his director compensation by releasing his time sheets and accuses him of purposefully not answering questions.
What’s clear from the tone and frequency of Icahn’s letters is that he seems more and more convinced that, as a Yahoo investor, he needs to push his slate of candidates to unseat the company’s directors at the next shareholder meeting in August and, he hopes, bring Microsoft back to the negotiating table.
Separately on Monday, Yahoo announced the filing of its Definitive Proxy Statement with the U.S. Securities and Exchange Commission, in which the company, unsurprisingly, urges shareholders to re-elect the current board and reject Icahn’s candidates.
Calling the upcoming meeting on Aug. 1 “the most important for stockholders in our history,” Bostock and CEO Jerry Yang said in the proxy statement that the board and management’s strategy “to create value … is gaining traction.”
The focus of the latest angry exchange of letters, which started last week, is Yahoo’s adoption of an employee severance plan that both Icahn and Yahoo shareholders suing the company allege was implemented to sabotage Microsoft’s attempt to acquire Yahoo. Bostock and Yahoo’s top executives maintain that the severance plan was necessary in order to retain employees in light of the uncertainty created by Microsoft’s pursuit of Yahoo, which officially ended after three months in early May.
“I cannot understand why the Yahoo board feels so strongly about its ‘poison pill’ severance plan and why it continues to refuse to rescind it. How can you continue to repeat that your severance plan is in the best interests of shareholders and employees?” Icahn wrote in Monday’s letter.
Yahoo didn’t immediately respond to a request for comment, but on Friday issued a brief statement saying that Icahn, in his previous missive, had inaccurately interpreted the “retention” plan and that his suggestions that the plan be cancelled would have a “destabilizing impact” on the company. Yahoo also accused Icahn of having “no credible plan to operate” the company.
The brevity and content of Yahoo’s statement on Friday clearly irked Icahn, who ripped into Bostock on Monday.
“In your press release from Friday, you stated again that I do not have a credible plan for Yahoo. Did you even bother to read my letter, which went into great detail on what measures I would ask the new board to take? Ironically, while you keep inquiring about my plans, it is interesting to note that Yahoo’s board has been busy reaping great compensation benefits. Indeed, you made approximately $10,000 per week last year — not bad for a board member. I believe most of your shareholders would be interested in seeing your time sheets—especially in light of the fact that, in my estimation, most of your so-called ‘plans’ over the last few years have been failures,” Icahn wrote.
Icahn also reiterates his call for removing Yahoo cofounder Yang as CEO and returning his “Chief Yahoo” title, so that the company can hire “a talented and experienced” replacement, offering Google CEO Eric Schmidt as a model.
Meanwhile, Yang and Bostock reiterate in the proxy statement that they have “at all times been open to a transaction with Microsoft,” as long as it offers shareholders “full and certain value.”
Yang and directors engaged in “serious discussions with Microsoft,” including many in-person meetings, but all along felt that Microsoft wasn’t willing to pay a fair price for Yahoo, according to the proxy statement.
Moreover, putting Icahn and his slate on the Yahoo board will ultimately result in the loss of shareholder value, because Icahn “has no credible plan except to sell the company to Microsoft — despite the fact that Microsoft has publicly indicated that it has no current interest in such a transaction,” Yang and Bostock wrote.
“The future of Yahoo and the value of your investment are in your hands,” they added.
On Monday of last week, the partially censored complaint in a class-action shareholder lawsuit against Yahoo was released in its unedited form following the judge’s decision.
That complaint, filed in Delaware Chancery Court in February on behalf of shareholders the Police & Fire Retirement System and General Retirement System of Detroit, is full of angry allegations, copies of internal Yahoo documents and accounts of what plaintiffs characterize as Yahoo’s bad-faith maneuvers toward Microsoft.
Specifically, the document goes into great detail about the crafting of the severance plan to support the plaintiffs’ allegations that the plan was put in place solely as a “poison pill” technique to drive Microsoft away. After reading the unedited complaint, Icahn fired off his first letter last Wednesday to Bostock.
Microsoft announced its unsolicited offer to buy Yahoo on Feb. 1—a $44.6 billion cash-and-stock deal that offered shareholders a 62 percent premium over Yahoo’s stock price the day before. Yahoo’s board rejected that offer, saying it undervalued the company, and Microsoft later increased it to $47.5 billion, but Microsoft eventually walked away from the negotiations on May 3 after the two sides failed to agree on a price.
After Microsoft withdrew its offer, several large Yahoo institutional investors publicly criticized Yang and the board for, in their view, not negotiating in good faith and failing to look out for shareholders’ best interests.
Yang and other Yahoo executives responded by saying that they were open to negotiating further but that Microsoft unexpectedly walked away without ever putting its last offer in writing.
Then Icahn got into the picture, acquiring a significant amount of Yahoo stock and readying his proxy fight in order to reignite merger negotiations.
However, Microsoft officials have indicated that the company isn’t interested in buying all of Yahoo anymore.
Microsoft did acknowledge on May 18 that it has approached Yahoo with a proposal to enter into a more limited partnership or deal, which many observers believe likely involves Yahoo’s search advertising business.