Icahn Yahoo! writes! a! letter!

Urges shareholders to see sense

Yahoo! has written another letter to shareholders making clear exactly how and when it would sell to Microsoft and why shareholders should definitely not vote for Carl Icahn and his proposed slate of board directors. It also suggests Yahoo! could sell its Asian business and return money to shareholders.

The letter does not resort to the capital letters favoured by rival letter-writer Icahn but is equally damning.

Icahn, we are told, has created an impossible situation for himself - he has no leverage with which to negotiate a decent deal with Microsoft because he has no other plan for the company. Secondly Icahn and his would-be board do not have the experience either to restructure a high-technology company in a fast-changing environment. Nor do they have the experience to manage Yahoo! during the estimated year it would take to get regulatory approval of any possible takeover.

The letter asks what is behind the "odd-couple" collaboration between Microsoft and Icahn. It continues:

But Microsoft’s flip flops and inconsistencies over the past five months are so stupefying that one can only conclude that Microsoft was never fully committed to acquiring Yahoo! either because:

• Microsoft can’t decide what is and isn’t strategically important to its online business; or
• Microsoft is more interested in destabilizing a key competitor so that it can either enhance its competitive position or buy our highly valuable search business — and the enormously desirable intellectual property associated with it — at a bargain basement price.

The letter outlines three options acceptable to the existing Yahoo! management. The first is to sell the whole company to Microsoft for $33 a share or more provided Microsoft makes an offer which is certain to close and certain to provide that value. An alternative is to sell its search business to Microsoft provided it could do so in a way that safeguards the rest of Yahoo!'s business. Finally the board would consider a potential sell-off of its Asian business and return of cash to shareholders.

Yahoo! is a strong performer across Asia especially in Japan and South Korea.

The letter urges readers to "Please compare and contrast the straightforward, responsible actions and positions of your Board of Directors with the behavior of Mr. Icahn and Microsoft... We believe the Icahn slate and agenda present significant risk to your investment in Yahoo!. We believe you cannot count on Microsoft to bail out Mr. Icahn’s misguided agenda..."

The letter urges shareholders to vote using the white proxy card in favour of the current board of directors.

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