Icahn fires back at Yahoo!, wants severance plan rescinded

By Lisa Kerner

Charlotte, N.C., June 9 - Activist investor Carl Icahn blasted Yahoo! Inc. chairman Roy Bostock in a June 9 letter in response to the company's latest press release.

"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," Icahn wrote.

According to Icahn, even Yahoo!'s compensation adviser called the plan "nuts."

Yahoo! claimed that canceling its severance plan would have a destabilizing impact on the company, a prior company news release stated.

However, Icahn maintains that rescinding the severance plan would free up $2.4 billion or more that could be added to a new Microsoft Corp. bid for Yahoo!.

Icahn previously noted that if Yahoo! is acquired, employees may decide not to work as hard in the hopes of "cashing in on a robust severance package that awards up to two years salary and benefits, $15,000 of outplacement expenses, and accelerated vesting of stock options and restricted stock units."

If Microsoft is not interested in making a proposal, Icahn would ask the new board to do a search deal with Google Inc. that would not impede a subsequent acquisition by Microsoft, a prior news release said.

According to Icahn, Yahoo! previously denied shareholders the opportunity to sell to Microsoft at $40 per share in January 2007 and at $31 per share in January 2008, in addition to sabotaging a $33-per-share offer.

In his latest letter, Icahn said that despite Bostock's claims, he does have a credible plan for Yahoo! that was detailed in his prior letter.

Under Icahn's plan, a "talented and experienced" chief executive would replace Jerry Yang, who would return to his role as "chief Yahoo!."

Icahn contrasted Yahoo!'s income from operations over the last two years, which he said is down 21%, with Google's 59% increase for the same period.

Google's increase was attributed to its CEO by Icahn, who asked Bostock why he let Google leave Yahoo! "in the dust."

Icahn said his plan also includes asking the company's board, which Icahn hopes to replace with new members, to notify Microsoft that unless any alternative transaction can ensure a $33 or higher stock price, all talks of alternative transactions are over.

At Yahoo!'s 2008 annual meeting on Aug. 1, shareholders will be asked to elect nine directors to serve until the 2009 annual meeting or until their respective successors are elected and qualified.

Yang and Bostock, in a June 9 letter to Yahoo! stockholders, called the meeting "the most important for stockholders" in the company's history and urged shareholders once again to re-elect the current board.

Bostock told shareholders that while the board is focused on maximizing shareholder value, it has always been open to a transaction with Microsoft.

The chairman said that under Yang's leadership, Yahoo! has gained a more focused strategy, a more streamlined company and a "significant acceleration of specific initiatives to capitalize on the fast-growing online advertising market."

Bostock said that the greatest growth opportunity for Yahoo! is in online advertising, a market that is expected to reach $75 billion in 2010.

In the letter to stockholders, Bostock also reiterated his belief that Icahn has no credible plan to create value for Yahoo! stockholders.

Icahn nominated a slate of nine candidates plus himself for election to the Sunnyvale, Calif., internet services provider's board.

The Federal Trade Commission recently granted early termination of antitrust reviews in Icahn's bid to purchase up to $2.5 billion of Yahoo! stock.

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