Let’s see, where were we?
Oh, yes, corporate raider Carl Icahn wants Yahoo “to stop
dancing around” and publicly offer to sell out to Microsoft for $34.375 a share
($49.5 billion) – more than the $33 Microsoft verbally offered, less than the
$37 Yahoo CEO Jerry Yang asked for. And none of these penny ante half-way deals
like selling them the search business like he’s been reading about in the paper.
And if Microsoft doesn’t bite then Yahoo should cut a search deal with Google –
but nothing it can’t get out of in a heartbeat if Microsoft changes its mind.
To which Yahoo basically replied, “You call THAT a plan? THAT’S not a plan.” To
which Icahn replied, “Oh, yeah, well, if your plans these last few years were
so great how come you’re eating Google’s dust.”
Or, in his own words to Yahoo chairman Roy Bostock
Monday: “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. Remember the
old adage – those who live in glass houses should not throw stones.”
And he added “While Google’s income from operations
grew 59% per year for the last two years, Yahoo’s income from operations shrank
21%. What was the board doing over this period? Where was their great ‘plan’?”
Then they got down to the real taunting.
The argument of the week comes down to the punitive,
xenophobic, “change of control” employee severance plan with which Yahoo ringed
itself like some kind of Bronze Age chevaux-de-frise to repel Microsoft’s
According to Icahn, it’s supposed to incentivize everybody
at Yahoo to quit. It’s also supposed to be what de-incentivized Microsoft – or
at least moderated its sweetener.
Last week – in his best line yet – he called the severance
plan a “self-destructive doomsday machine” straight out of James Bond.
Icahn, who says he exercised his options and now really does
own 4.3% of Yahoo, calculates it could add $2.4 billion to the cost of a
takeover. Yahoo claims it’s more like $514 million or $845 million depending on
whether 15% or 30% of Yahoo’s staff pulled the parachute cord and resigned “for
good reason” – like any change in responsibility, bonus opportunity or location.
In response, Yahoo claims it’s not, as Icahn characterizes
it, a “poison pill” and yet it’s ringing it like a leper’s bell warning that a
successful Icahn proxy fight will trigger it.
Yahoo also says that its board can’t dismantle the plan,
which it claims is a employee retention plan, until any possibility of change
of control has been abandoned for 30 days; Icahn restarted the clock.
Icahn may be helped along by the pension funds suing Yahoo
“A prompt trial on the validity of the severance plans is
now essential and appropriate, not least because Yahoo’s board disabled itself
from rescinding the severance plans during the pendency of a proxy fight, even
if doing so is essential to realizing a favorable deal, and because Icahn’s
slate is barred from rescinding the severance plans if it prevails in its proxy
contest,” their lawyers argued.
The suit already names co-founders Jerry Yang and David Filo
and according to Reuters Icahn said during a speech at a New York Financial
Writers Association dinner Tuesday that Yahoo’s board may be “personally
liable” for sanctioning the plan.
Icahn also contended that Microsoft needs Yahoo to remain
competitive during the next five years. It’s a “marriage made in heaven, even
though they kind of hate each other,” Icahn said.
Yahoo Monday filed its proxy statement so it can go out and solicit votes to shoot down Icahn’s bid to unseat the board on August 1. It’s telling shareholders, “Even if you have previously signed a proxy card send by the Icahn Entities, you have the right to change your vote. Only the latest dated proxy you submit will be counted.”