Yahoo Pleads for Support of Board

Yahoo is questioning whether Microsoft ever intended to acquire the company. The management of the Internet company prepared a 32-page investor presentation urging its shareholders to support current directors at the company's upcoming annual meeting.

It also targeted activist investor Carl Icahn, who holds a sizable stake in Yahoo and called on the company's board to complete a deal with Microsoft. Yahoo stated, “Icahn’s ill-defined plan is focused on selling the company to Microsoft, even though Microsoft has repeatedly confirmed that it is not interested in a full acquisition.” The presentation also stated that the company’s ability to execute its strategic plan would be compromised under Icahn’s plans, according to the press release.

A Microsoft spokesperson commented on the matter, only saying, "This is simply revisionist history."

Icahn Demands:

1. Propose sale to Microsoft
2. Suspend talks with Microsoft other than full company acquisition
3. Enter into a Google agreement
4. Replace Jerry Yang as CEO
5. Replace/rescind change in control severance plan

Yahoo’s Argument:

1. Microsoft has confirmed it is not interested in a full acquisition, though Yahoo remains open to a sale
2. Yahoo agrees that a Microsoft acquisition of search is not in the stockholders’ best interest Signed Google agreement creating significant value
3. Jerry is key driver and facilitator of our strategic plan
4. Canceling our change in control severance plan would have destabilizing impact

Yahoo’s presentation says that at meetings on May 17 and June 8—prior to a Google agreement—board members asked Microsoft whether it was interested in a full company acquisition. According to the presentation, “Microsoft unequivocally stated that it had no intention of making a full company acquisition and clarified on June 8 that it would not do so even at the price range it had previously suggested.”

Microsoft proposed a “hybrid” search-only structure, which, according to Yahoo’s board, did not benefit Yahoo strategically or financially. Yahoo determined that Microsoft’s inconsistence and inability to commit to a whole company acquisition is what led the Yahoo board to turn down the initial $31-per-share original offer made by Microsoft. Yahoo also stated in its presentation that Microsoft threatened to withdraw, lower its price, and threaten a proxy fight.

The presentation also summarized the Yahoo-Google agreement. The non-exclusive agreement in the U.S. and Canada indicates that Yahoo is free to display paid search results from Google and other third parties. Yahoo will be able to utilize Google, Panama, and other providers to increase ad revenues. The 4-year initial term would allow Yahoo the right to renew for two additional 3-year terms. Yahoo will receive a paid percentage of revenues from whatever Google ads it shows on Yahoo pages.

After providing further detail as to how Yahoo and Google will join forces, the presentation concludes reiterating that Icahn’s slate is not the right answer and that Yahoo’s board is equipped and able to provide the best results for their shareholders.