Yahoo to Icahn: You misunderstand

Yahoo to Icahn: You misunderstand

Summary: Yahoo's board has responded to activist investor Carl Icahn: "Your letter reflects a significant misunderstanding of the facts about the Microsoft proposal."That letter--delivered by Icahn earlier Thursday (Techmeme)--has one theme: Yahoo's board botched the Microsoft deal and hasn't served shareholder interest.

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Yahoo's board has responded to activist investor Carl Icahn: "Your letter reflects a significant misunderstanding of the facts about the Microsoft proposal."

That letter--delivered by Icahn earlier Thursday (Techmeme)--has one theme: Yahoo's board botched the Microsoft deal and hasn't served shareholder interest.

In its rebuttal letter, Yahoo Chairman Roy Bostock said:

Unfortunately, your letter reflects a significant misunderstanding of the facts about the Microsoft proposal and the diligence with which our board evaluated and responded to that proposal. A fair-minded review of the factual record leads to one conclusion: that Yahoo!’s ten-member board, comprised of nine independent directors along with Yahoo! CEO Jerry Yang, remains the best and most qualified group to maximize value for all Yahoo! stockholders.

Conversely, we do not believe it is in the best interests of Yahoo! stockholders to allow you and your hand-picked nominees to take control of Yahoo! for the express purpose of trying to force a sale of Yahoo! to a formerly interested buyer who has publicly stated that they have moved on. Please may I remind you that there is currently no acquisition offer on the table from that company or any other party. That said, we have been crystal clear in our stance that we have been and remain willing to consider any proposal from any party including Microsoft if it offers our stockholders full and certain value.

Translation: You're trying to take over our company even though Microsoft isn't in cahoots with you--yet.

May the proxy war games begin.

Here's the full text:

Dear Mr. Icahn:

We are in receipt of your letter with regard to your intention to seek control of Yahoo!’s board of directors.

Unfortunately, your letter reflects a significant misunderstanding of the facts about the Microsoft proposal and the diligence with which our board evaluated and responded to that proposal. A fair-minded review of the factual record leads to one conclusion: that Yahoo!’s ten-member board, comprised of nine independent directors along with Yahoo! CEO Jerry Yang, remains the best and most qualified group to maximize value for all Yahoo! stockholders.

Conversely, we do not believe it is in the best interests of Yahoo! stockholders to allow you and your hand-picked nominees to take control of Yahoo! for the express purpose of trying to force a sale of Yahoo! to a formerly interested buyer who has publicly stated that they have moved on. Please may I remind you that there is currently no acquisition offer on the table from that company or any other party. That said, we have been crystal clear in our stance that we have been and remain willing to consider any proposal from any party including Microsoft if it offers our stockholders full and certain value.

From the beginning of the process with Microsoft, Yahoo!’s independent directors focused on one central goal: how best to maximize stockholder value. At all times directing this process, Yahoo!’s independent directors carefully considered Microsoft’s initial unsolicited proposal, which was at the time valued at $31 per share. After considering input from its financial advisers the board unanimously concluded that Microsoft’s proposal significantly undervalued Yahoo! and was, therefore, not in the best interests of the company or our stockholders. While we rejected this offer publicly on February 11, 2008, we could not have been more clear in that communication and in every subsequent communication, both public and private, that we were and are willing to enter into any transaction that would maximize value for stockholders and provide them certainty of value.

The record of our efforts to engage Microsoft in meaningful discussions is unequivocal. Following receipt of Microsoft's proposal on January 31, our board of directors has met over twenty times to review Microsoft's proposal and Yahoo!'s other strategic alternatives. Throughout this process our board kept an open mind and an open ear. Our independent directors met with several of our largest stockholders to solicit their views and to make it clear that Yahoo!’s independent board is fully committed to maximizing stockholder value. In addition, at the direction of our board, our management team met with many of our investors to provide insight into Yahoo!'s strategy and views on value.

Our board’s openness also extended to Microsoft. Without reciting all of the contacts between us and between our advisers, the senior-most management of Yahoo! and Microsoft and the companies’ respective financial advisers spoke on numerous occasions and met in person seven times. During those meetings, Yahoo! discussed its strategic objectives in search and display advertising monetization, its perspectives on operating strategy and integration in a transaction with Microsoft, its perspectives on transaction synergies, and other non-price deal terms. Because certainty of closing is a critical issue, we sought to understand Microsoft’s thinking with regard to the regulatory issues associated with a potential transaction. In fact, at the board’s direction, our lawyers on March 28 asked for additional information in this regard, information which was never forthcoming.

On April 15th, a meeting was held at Yahoo!’s request. At that meeting, which included our respective financial advisors, we made clear, once again, that we were open to a transaction with Microsoft. During those discussions, Yahoo! made a detailed presentation of its strategic and financial plan, its thoughts on integration and its view with respect to the potential synergies that could be achieved in a transaction, essentially laying the foundation for Microsoft to understand—and respond to—our board’s conclusion that Microsoft’s offer substantially undervalued the company. Following that meeting we also provided to Microsoft a list of key non-price deal terms that our board believed were critical items to be addressed in a deal to provide reasonable protections for our stockholders.

Throughout this period, Microsoft continued to state that it would not raise its offer, and even suggested that it could lower it.

Despite this failure by Microsoft to respond in any substantive way to any of Yahoo!’s requests, on May 2nd, the same day we first learned of Microsoft’s apparent willingness to increase its proposal to $33 (although this oral “offer” was never delivered in writing and did not include details of a cash/stock mix), our board determined to continue discussions, instructing Jerry Yang to indicate to Microsoft that we would be prepared to enter into a transaction that valued Yahoo! at $37 per share and that provided reasonable certainty of value and certainty of closing. This was communicated to Microsoft in-person at a meeting in Seattle on May 3rd. With Microsoft’s offer at $33 and Yahoo!’s counter-proposal at $37, Microsoft elected, within hours, to walk away from the negotiating table and informed us that they were “moving on,” having never engaged further on price or any of the key non-price deal terms.

In short, Yahoo!’s board was at every point in this process prepared to enter into a transaction with Microsoft that would maximize stockholder value—and included certainty of value and closing. What Yahoo!’s independent board refused to do was to allow control of this company to be acquired for less than its full value.

That brings us to today. Our business is performing well as evidenced by our first quarter results. As we have publicly stated, our board continues to actively and expeditiously explore strategic alternatives to maximize stockholder value. None of the alternatives we are considering would preclude us from entering into a transaction with Microsoft or any other party.

We continue to believe that Yahoo!’s current board has the independence, the knowledge, and the commitment to navigate the Company through the rapidly changing Internet environment and to deliver value for Yahoo! and its stockholders.

We look forward to a productive dialogue.

Very truly yours,

Roy Bostock

Chairman of the Board

Topics: Legal, CXO, Enterprise Software, Microsoft, Social Enterprise

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18 comments
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  • Shakespearean Drama

    Methinks the lady doth protest too much.

    BW
    BobWarfield
  • They all are telling Yahoo to "Sell to MS"

    but Microsoft said today: [i]A Microsoft spokesman declined to comment on Icahn's letter, saying the Redmond, Wash.-based company has "moved on."[/i]

    Icahn may find he'll be running the company for some time to come if this goes through.
    AllKnowingAllSeeing
    • All Icahn wants to do...

      is turn a profit. Once he is in control he will be able to make MS an offer Ballmer won't be able to turn down and he will still make a boat load of money - which is all any of the stockholders want. They don't care about Yahoo's future. Once they sell it's on to the next investment.

      I still believe Ballmer intends to let Yahoo run the way it has been. I think Ballmer knows that MS's push to the Internet has not been as successful as he would like. If Yahoo's plan is better, Ballmer is smart enough to go with it.
      bjbrock
  • The election campaign has begun

    The stockholders will decide this one way or another. Whether or not MS will be interested if Icahn's slate wins, time will have to tell.
    John L. Ries
  • Translation, we are going to be replaced and we know it.

    Oh well, bad management is often replaced and when you turn down $35 a share to be bought for $20.
    No_Ax_to_Grind
  • What it really said...

    In a rebuttal letter to icahn, ceo kim jong il said:

    "Your letter shows you have a misunderstanding of microsoft's offer. This offer was from microsoft, get it? Darth vader, evil empire. Did you forget we aren't in business to make money... what... wait you are? What do you mean you're an 'investor?' You wanted a *return* on your money?! Well, it appears we have yet *another* misunderstanding..."
    Spiritusindomit
  • RE: Yahoo to Icahn: You misunderstand

    What the Yahoo board refuses to acknowledge is the basic tenet of capitalism. The value of anything is only what someone is willing to pay.
    jdorwart
    • Capitalism?

      "The value of anything is only what someone is willing to pay."
      I think you don't understand capitalism. What you've quoted is a basic tenet of commodities. Capitalism involves the ownership of assets which are used to make a profit. It's a process. How well that process is working or will work determines the value of the asset. Microsoft disagrees with you. They offered more than anyone else was willing to pay.
      Badge3832
  • Icahn is a turd

    It's really amazing how one man thinks he can just step in and control everything. This is where Wall Street fails, and epic failure IMHO.
    Narg
  • RE: Yahoo to Icahn: You misunderstand

    He not just one man, he is one owner of Yahoo (and he owns a significant amount of the company). So yes, as an owner of the company his thoughts and beliefs should be taken into consideration.
    Please remember, Yahoo! decided to go public and once public, the boards first prioriry is to increase shareholder wealth.
    Yahoo! could have stayed private and been able to set the rules about who they courted and rejected, but once they sold the company to the public, they immediately inherit the obligation to increase shareholder wealth.
    You can't take the publics money and then tell them to butt out.
    Fark
  • RE: Yahoo to Icahn: You misunderstand

    Icahn is the investor that I cant stand, they come in buy up a a company then pillage it till its gone and move on to the next one. Similar to what Jerry York did to Microwarehouse. I do not agree with mondern business either, how one person can have that much power and force a companies whim like that.
    computergeek289
    • If you don't like an investor, don't take his money

      Welcome to the real world. If you don't like it and can't do anything about it, just wait it out. We have a finite lifetime anyway.
      busko68
      • Since when did the stock market allow...

        Public companies to stop someone buying stock?

        For example, presume for the moment that I'm a card carrying ABMer with a stack of money from here to the moon and back a few times. Could Microsoft stop me buying up their shares? Somehow I think not.
        zkiwi
  • M$ should sell to Yahoo!

    Yahoo! should take-over M$. At least they had the guts to
    apologize for assisting the Red Chinese thugs to violate
    the rights of Chinese people, and pledged to pay
    restitution to the families of the victims.

    We haven't seen even an apology from M$, or Cisco or any
    of the rest.
    Professor8
    • Except...

      Aside from not having enough money to buy microsoft, MS, yahoo and cisco did nothing wrong. Cisco actually had their designs STOLEN by chinese people and the chinese were illegally reproducing those routers and shipping them with the cisco brand. All companies who disclosed information were complying with chinese law, whether you agree with it or not is irrelevant. I'm sorry that the world can't simply comply with the will of Professor8 rather than legitimate governments who have a thorough understanding of the issues facing the largest population on the planet, which resides in a mostly uninhabitable landmass less than the size of the continental united states.

      Yahoo! paid out because they are a small, consumer oriented fish. It doesn't mater what the consumer at large thinks about microsoft or cisco, they aren't oriented towards consumer services. Though, going by the name professor I'm sure you have no idea what the needs of business really are.

      Please, reply and continue to reveal your ignorance to everyone who is reading.
      Spiritusindomit
  • Maybe it's just me...

    But isn't this guy the last of the corporate raiders?

    So, why does anyone care what he wants or what he says is a "good thing?"

    Who knows, perhaps he bought up all these shares hoping to make a killing if the original takeover offer went through and now he's just ticked that it didn't.

    And to finish, and because it is conspiracy theory Friday, I do wonder where he got all the money for his sudden 4%-5% shareholding? Is it perhaps SCO financing revisited?
    zkiwi
  • RE: Yahoo to Icahn: You misunderstand

    $26.80 ashare and good Karma. GLOBAL GLOBAL GLOBAL GLOBAL: W=where is richie from the Navy Electronics wholesale? I guess we through the "Book" at him from Intel's legal department. all that RFC right out into raptor raid coding from Black Belt.
    rtirman37