IE 11 is not supported. For an optimal experience visit our site on another browser.

Icahn says he’ll remove Yang as Yahoo CEO

Activist investor Carl Icahn doubts Yahoo Inc. seriously considered Microsoft Corp.’s $47.5 billion takeover offer.
/ Source: The Associated Press

Outraged by new details about Yahoo Inc.'s efforts to complicate Microsoft Corp.'s takeover bid, activist investor Carl Icahn says he believes Yahoo's board will have to be fired to lure Microsoft back to the bargaining table.

Icahn asserted in a Tuesday interview with The Wall Street Journal that Microsoft is unlikely to renew its courtship as long as Yahoo Chief Executive Jerry Yang and the company's eight other directors remain on the job.

"I'm very cynical about many of the boards and CEOs in this country, but even I am amazed at the lengths that Jerry Yang and the board went to entrench themselves in this situation," Icahn told the Journal.

Icahn filed plans nearly three weeks ago to lead a shareholder revolt against Yahoo's board, which includes Yang, who co-founded the Internet pioneer 14 years ago.

Yahoo on Tuesday set the date for its showdown with Icahn by scheduling its annual shareholders meeting for Aug. 1 in San Jose. The company has already delayed the meeting twice since the Microsoft saga began.

( is a joint venture of Microsoft and NBC Universal.)

Until Tuesday, Icahn had been holding out hope that Yahoo's board would avert a shareholder mutiny by renewing talks to sell the Sunnyvale-based company to Microsoft. The software maker withdrew an oral offer of $47.5 billion, or $33 per share, a month ago after Yang sought $37 per share, or about $52 billion.

But Icahn told the Journal he has concluded that Yang and Yahoo's board have antagonized Microsoft too much to get a deal done. He made his remarks after reviewing internal Yahoo records that were unsealed by a Delaware court judge Monday.

Icahn, who has spent more than $1 billion so far to acquire a 4.3 percent in Yahoo, indicated he would give further details on his campaign to overthrow the board in the next day or so. The Associated Press has left repeated messages with Icahn in recent weeks.

In a statement, Yahoo said its board has been "crystal clear" about its willingness to explore any Microsoft proposal that "was in the best interests of its shareholders. To that end, Yahoo has engaged in extensive discussions with Microsoft over the last several months, culminating in Microsoft's decision not to pursue an acquisition of Yahoo. Mr. Icahn's assertions ignore this clear factual record."

A Microsoft spokesman declined to comment Tuesday.

Since the takeover talks unraveled, Microsoft and Yahoo have acknowledged discussing an online search deal that wouldn't meld the two companies together completely. Redmond, Wash.-based Microsoft still hasn't ruled out reviving an attempt to buy Yahoo in its entirety.

The mudslinging between Icahn and Yahoo will likely get messier before the matter comes to a shareholder vote. In Tuesday filing with the Securities and Exchange Commission, Yahoo estimated it will spend about $12 million fighting the battle.

Icahn's latest attack on Yahoo's board came after court documents illuminated Yang's efforts to increase the costs of a potential Microsoft acquisition. The records were obtained as part of a shareholder lawsuit alleging Yahoo's board has improperly resisted Microsoft's overtures dating back to August 2006.

Shrugging off the misgivings of outside consultants, Yang pushed for an employee severance package that guaranteed generous cash and stock payment to all 13,800 of Yahoo's workers if they were fired or quit after being reassigned to another job within two years of a Microsoft takeover.

Yahoo's internal records estimated the severance plan would have cost Microsoft an additional $462 million to $2.1 billion if a deal had been done at the initial bid of $31 per share. The severance costs would have ranged from $514 million to $2.4 billion if Microsoft had raised the bid to $35 per share, according to the estimates.

Yang created the severance plan even after Microsoft CEO Steve Ballmer told him the software maker intended to offer Yahoo employees $1.5 billion in retention packages, according to notes from a Jan. 31 phone conversation with the executives.

"It's no longer a mystery to me why Microsoft's offer isn't around," Icahn said. "How can Yahoo keep saying they're willing to negotiate and sell the company on the one hand, while at the same time they're completely sabotaging the process without telling anyone."

Icahn said he intends to use some of the information unsealed Monday to persuade Yahoo shareholders to oust the company's board. Meanwhile, Yahoo is recommending its shareholders don't sign any cards supporting Icahn's alternate slate of directors.

If at least five of Icahn's candidates are elected, it will trigger a "change-in-control" provision entitling Yahoo's top five executives to severance packages with a combined value of $24.7 million, according to Tuesday's SEC filing.

Besides providing more details about Yahoo's employee severance plan, the newly released court documents cited internal company records indicating that Microsoft had made an acquisition proposal in January 2007. The shareholder suit indicated Microsoft had offered about $40 a share then.

After Yahoo said it was "unaware" of a $40 per share offer Tuesday, shareholder attorney Mark Rebovitch said the figure was drawn from stories by The Associated Press and other media that quoted unnamed people. Rebovitch said the Yahoo records obtained as part of the lawsuit clearly indicated Microsoft made a buyout proposal in early 2007, but the documents didn't specify a price.