Late Thursday, internet giant Yahoo! Inc. (YHOO) responding to Billionaire investor Carl Icahn's letter said he has misunderstood the Microsoft Corp. (MSFT) offer and that the current ten-member board of Yahoo remains the best and most qualified group to maximize value for all Yahoo shareholders. In his letter, Icahn had confirmed his interest in waging a proxy contest to replace the ten-member Yahoo board with his full slate of nominees. The voting is set to take place on July 3 at Yahoo's annual general shareholder meeting. Icahn also informed that he has purchased about 59 million shares and share-equivalents of Yahoo as well as further sought permission from the Federal Trade Commission to buy up to $2.5 billion worth of Yahoo stock.
"Unfortunately, your letter reflects a significant misunderstanding of the facts about the Microsoft proposal and the diligence with which our board evaluated and responded to that proposal," said Yahoo Board Chairman Roy Bostock.
Yahoo also stated in the letter that there is currently no fresh offer on the table for a take over, after Microsoft withdrew its $33 per share bid. Further, Yahoo said it is not in the best interest of the Yahoo shareholders that Icahn force a sale to Microsoft and that Yahoo is still open to consider other offers, including from Microsoft, provided they offer value to its shareholders. Yahoo noted that none of the alternatives it is considering would preclude it from entering into a transaction with Microsoft or any other party.
Yahoo also said that its independent directors have always worked towards a goal of maximizing shareholder value, even when rejecting the initial Microsoft offer as well as the sweetened offer of $33 per share. While considering Microsoft's unsolicited proposal along with inputs from Yahoo's financial advisers, the board unanimously concluded that Microsoft's proposal significantly undervalued Yahoo.
In its efforts to reach an agreement with Microsoft, Yahoo noted that its board met over twenty times to review Microsoft's proposal and to consider other strategic alternatives. Yahoo and Microsoft along with their financial advisers spoke on numerous occasions and met in person seven times. The directors also met several of Yahoo's largest shareholders to obtain their views on the offer and other shareholder value enhancing alternatives.
Additionally, Yahoo noted that its board, through their lawyers, had asked for some additional information from Microsoft, which they never received. As a major hindrance, through out the period of negotiations, Microsoft continued to state that it would not raise its offer, and even suggested that it could lower it.
Finally, Yahoo again emphasized that its current board continues to actively and expeditiously explore strategic alternatives to maximize shareholder value. Further, Yahoo stated that its current board has the independence, the knowledge, and the commitment to navigate the company through the rapidly changing Internet environment.
Shortly before the opening bell, confirming speculation of Icahn launching a proxy contest to replace the entire Yahoo board, Icahn sent an open letter addressed to Roy Bostock, the chairman of Yahoo's board of directors. In his letter, Icahn accused Yahoo's board of directors of "acting irrationally" in rejecting Microsoft's $33 per share or $47.5 billion buyout offer.
Icahn said in his latter that he as well as many of Yahoo's shareholders believe a combination between Microsoft and Yahoo! would be a force strong enough to compete with Google Inc. (GOOG) on the Internet.
"It is quite obvious that Microsoft's bid of $33 per share is a superior alternative to Yahoo's prospects on a standalone basis. I am perplexed by the board's actions," Icahn said.
Icahn revealed that several shareholders have asked him to lead a proxy fight to attempt to remove the current board and establish a new board which would attempt to negotiate a successful merger with Microsoft.
Icahn also disclosed that during the last few days, he has purchased about 59 million shares and share-equivalents of Yahoo! as well as formed a ten-person slate of directors to contest elections against the current Yahoo board. The proposed directors include Dallas Mavericks owner Mark Cuban and former chief executive officer of Viacom Inc. (VIA) Frank Biondi Jr. and Icahn himself. Further, Icahn has also sought permission from the Federal Trade Commission to buy up to $2.5 billion worth of Yahoo stock.
"I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary," Icahn concluded his letter.
Icahn, the proxy war veteran is seen as having the financial resources as well as the experience in forcing companies to the negotiating table. Icahn has taken controlling positions in several companies. In his most recent battle with Motorola Inc (MOT), Icahn has successfully led the ouster of its Chief Executive Officer Ed Zander and the spin-off of Motorola's mobile phone unit. Icahn also led the BEA systems Inc. (BEAS) sale to Oracle Corp. (ORCL). Icahn is currently supporting video-store chain Blockbuster Inc. (BBI)'s attempt to buy electronics retailer Circuit City Stores Inc. (CC). Icahn may purchase Circuit City himself if Blockbuster is unable to muster the required funds.
After over three months of unfruitful negotiations, Microsoft lost patience with Yahoo. Following a series of discussions with Yahoo, Microsoft had announced on May 3 that it has withdrawn its proposal to acquire Yahoo after the two parties failed to reach a consensus on the acquisition price.
Microsoft was eyeing the biggest-ever technology takeover after failing to compete with Google in online advertising market. The online advertising market is estimated to grow $80 billion by 2010. However, Yahoo's board wanted an offer of $37 per share, even though the company's stock had not reached that level in more than two years.
The possibility of a proxy battle has loomed ever since Yahoo said that it had rejected Microsoft's offer. Though Icahn is going ahead with his proxy battle, there are no indications that Microsoft would return to the negotiation table to acquire Yahoo.
Icahn was undecided for a couple of days on waging a proxy contest on Yahoo as Microsoft had decided to move on and was not planning another offer for Yahoo. Microsoft chairman Bill Gates remarked last week that the company will not pursue other deals after the withdrawal of its takeover bid for Yahoo.
Following Yahoo's rejection of Microsoft's sweetened bid. Yahoo shares declined 15% on May 3. The stock closed Thursday's regular trading session at $27.75, up $0.61 or 2.25%. The stock has now advanced 13.9% from the recent lows of $24.37 on May 3. In the past 52-week period, the stock has been trading in a range of $18.58 to $34.08.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.