Icahn, Yahoo Ratchet Up War of Words
Carl Icahn's public airing of his disagreement with Yahoo's board is probably not motivated by a need to vent his frustration over the company's resistance to a Microsoft takeover attempt. Icahn is setting the stage for an August proxy battle and hopes to entice shareholders to enlist in his army.
06/06/08 12:54 PM PT
You don't have to be a political junkie to be aware of the verbal tussling that's been going on of late between Sens. Obama, Clinton and McCain. Their traded barbs have become part of the daily fare served up continuously on TV and radio shows, as well as in print and online media.
Now, activist investor Carl Icahn seems to be borrowing tactics straight from the politicos' playbooks in his effort to force Yahoo back to the table with Microsoft -- assuming, of course, that Microsoft has any interest in pulling up a chair.
Icahn's maneuvers are simple and daring: Make your case public (something many businesses are loath to do during an internal conflict). Define your opponent. Bring others to your side.
In the latest public exchange of letters between Icahn and Yahoo Chairman Roy Bostock, the focus appears to be on which party is distorting the facts surrounding the complicated acquisition narrative more.
Earlier this week, Icahn accused Yahoo's CEO Jerry Yang and the company's board of going to "inordinate lengths to sabotage" Microsoft's bid. The US$2.4 billion severance package that would have been granted in the event of a Microhoo deal was a de facto poison pill clause, he said.
Bostock refuted the allegations almost immediately, complaining that Icahn "misrepresents and manipulates" the facts. Yahoo has "reached out" to Microsoft in the past few weeks, he added, and remains open to a deal.
"You rely on, as 'facts,' a series of unsubstantiated allegations from a complaint filed in a Delaware court which grossly misstate the very clear record and position established by the Yahoo board," Bostock wrote.
The severance package, he explained, was meant "to help us preserve and enhance shareholder value by allowing Yahoo to continue to attract and retain the industry's best talent, and to allow employees to stay focused on implementing Yahoo's business strategy."
Furthermore, he fumed, "conspicuously absent from your letter is any credible plan for Yahoo other than a repetition of your insistence that the company should sell itself to Microsoft."
The next day brought another volley from Icahn: "Roy, it is you who 'misrepresents and misstates the details' of the plan. Much like the rhetoric in many well-known political campaigns, you keep repeating misstatements in the hopes that by repeating misstatements enough times it will convince your shareholders that these misstatements are valid. For example, you repeated, 'the plan was fully disclosed at the time of its adoption and should be no surprise to anyone at this point.' This is simply not true. The egregious magnitude of the dollar amount cost of the plan was never fully disclosed, nor was the email from your compensation advisor calling the plan 'nuts.'"
Yahoo's response: "Leaving aside Mr. Icahn's inaccurate interpretation of our retention plan, we again note that he has no credible plan to operate Yahoo!. We believe that Mr. Icahn's suggestion that we cancel our retention plan would have a destabilizing impact on Yahoo! and would clearly not be in the best interests of our shareholders. Furthermore, his suggestion that we put out a price publicly to see if Microsoft will alter its stated position is ill-advised."
At this point, it is difficult to gauge what Icahn is trying to achieve with his public offensive -- other than to persuade other shareholders to endorse his position, Peter Cohan, the president of venture capital and consulting firm Peter S. Cohan & Associates, told the E-Commerce Times.
"He is an expert at making a lot of noise and getting people to cover his letters and comments," he observed.
Will the public back-and-forth make much of a difference in shaping the decision that Yahoo and Microsoft come to? Probably not, in Cohan's view, although he hedged a bit on that point, saying it was difficult to be certain, given the high likelihood that other behind-the-scenes negotiations will make their way into the public arena.
"If nothing else, the letters are fun to read and people think it is entertainment," he quipped.
The situation is no laughing matter for Yahoo, though -- especially as less-than-favorable details come to light, Venkat Venkatraman, a professor at the Boston University School of Management, told the E-Commerce Times.
"Yahoo is in a quandary," he said. "News comes out now that they rejected a $40 offer previously" -- a tidbit of information that might make it more difficult for CEO Jerry Yang to stay on board.
Carl Icahn is right to publicly pressure the Yahoo board, Venkatraman continued. He's making his intent clear.
"As someone intent on a proxy fight, it is in his best interest to make his views public for the sake of other stockholders who may want to get behind him," he reasoned. "He knows that his letter may be made public by Yahoo or during any case hearing. So, why not make it part of his arsenal of ways to put pressure on Yahoo's board?"