Icahn shows his hand
Corporate raider Carl Icahn and Yahoo Chairman Roy Bostock have been exchanging non-love letters this week about whether the Yahoo board harmed shareholder value in the failed negotiations with Microsoft (MS) and deserves to be replaced by Icahn’s slate.
Icahn said Yahoo should dump CEO Jerry Yang, offer itself to MS for about $2 billion more than MS offered last month after getting rid of a poison pill employee severance plan, and complete a search advertising deal with Google if MS refuses the offer.
The key phrases were that Yahoo should replace Yang with a “talented and experienced CEO” like Google’s Eric Schmidt, without specifying who that might be, and that Bostock should “stop dancing around the subject” and publicly offer to sell the company to Microsoft at $34.375 a share.
Bostock replied that Icahn’s letter simply proves he has no credible plan to operate Yahoo, that to cancel the employee retention plan would destabilize Yahoo, and that to “put out a price publicly to see if Microsoft will alter its stated position is ill-advised.”
He has a point. Talented and experienced CEOs do not exactly grow on trees, and setting such a precise price-tag on the deal seems unwise. Nor is Google likely to go for a deal which “contains termination provisions that would in no way impede a subsequent acquisition by Microsoft.”
Intriguingly, the Yahoo board’s rebuttal did not say Icahn’s suggestion of $34.375 per share was too low. MS offered to pay $33 and abandoned the bid after Yang held out for at least $37 a share. Many large Yahoo shareholders have said they would have been willing to sell for about $34.
