Icahn out to replace Yahoo! board, CEO over failed Microsoft merger

By Lisa Kerner

Charlotte, N.C., June 4 - Carl Icahn said replacing Yahoo! Inc. chief executive officer Jerry Yang as well as the company's current board is the best chance to bring Microsoft Corp. and Yahoo! together.

In a June 4 letter to Yahoo! chairman Roy Bostock, Icahn noted that any merger of the two companies will take time. Yahoo! needs a board that will "negotiate in good faith with Microsoft and in whom Microsoft will have trust to operate the company during the long period between signing and closing."

The activist investor cited a complaint filed against Yahoo! that accuses Yang of engineering a plan that would allow Yahoo! employees to quit their jobs at any time following a takeover and "pocket generous termination benefits."

Ichan suggested Yahoo! rescind the poison pill severance plan to free up $2.4 billion or more that could be added to a new Microsoft bid for the company.

In the letter, Icahn said he was "amazed" at the lengths Yang and the Yahoo! board have gone to "entrench their positions and keep shareholders from deciding if they wished to sell to Microsoft."

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, the letter stated.

It was previously announced that Yahoo! would hold its annual meeting of stockholders on Aug. 1.

Yahoo! shareholders will be asked to elect nine directors to serve until the 2009 annual meeting or until their respective successors are elected and qualified.

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, a government release said.

In response, Yahoo said Icahn's letter "seriously misrepresents and manipulates the facts."

The company criticized as "a series of unsubstantiated allegations" the claims made in a complaint filed in a Delaware court which Yahoo said Icahn is drawing on.

Bostock wrote that the employee retention plan "is designed to protect the company's assets and value during a time of uncertainty."

He denied that Yahoo had turned down a $40 per share offer or sabotaged a $33 per share offer.

Yahoo is "open to any transaction, including a sale to Microsoft, as long as it is in the best interests of shareholders," Bostock added.

He said Yahoo had "reached out to Microsoft proactively and met with them many times in the last several weeks. During this period, their message to us and to the markets has been and remains that they are not interested in pursuing a full acquisition of Yahoo!"

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