Icahn: Yahoo Should Sell to Microsoft for $48.7 Billion

Carl Icahn Friday told Yahoo that it should offer to sell the company to Microsoft for $34.375 per share, or about $48.7 billion, as the financier fired another volley in an acrimonious war of words.

Yahoo Center
Yahoo Center

In his latest letter to Roy Bostock, Yahoo's chairman, Icahn said that if Microsoft doesn't accept the offer "in a friendly and cooperative transaction," he would push the Internet company to do a deal with Google if he wins control of the Yahoo board.

Icahn, who is running a dissident slate to replace Yahoo's board at its annual meeting on Aug. 1, hadn't previously named a price at which he believes Yahoo should agree to a sale.

Microsoft on May 3 walked away from a $33 per share, or $47.5 billion offer, after Yahoo demanded $37 a share.

Yahoo shares were recently trading up 17 cents to $26.52.

Icahn, a billionaire veteran of numerous shareholder campaigns, renewed his attack on Yahoo and its co-founder Jerry Yang, who he accused of "sabotaging" the possibility of a deal with Microsoft.

Investment funds controlled by Icahn hold about 59 million shares and options, or about 4.28 percent of the company.

"When the public owns shares, management can no longer treat the company as their plaything and fiefdom," Icahn said in an interview.

"They now are trustees and employees, which transforms into fiduciaries." Icahn reiterated his previous demand that Yahoo cancel a "change of control" severance plan that awards accelerated benefits to the bulk of Yahoo's staff in the event of a takeover.

Icahn cited a recent shareholder lawsuit against Yahoo, where the company estimated the value of the plan at "a staggering $2.4 billion," which he said is "a major obstacle" to any Microsoft acquisition.

"They keep telling us that they have done this severance plan in order to aid the employees," said Icahn. "But just the opposite is true, because they neglected to tell us that Microsoft set aside $1.5 billion which would benefit the employees," said Icahn.

He said Microsoft's plan benefits employees if they remain at the company, while Yahoo's plan gives them an incentive to leave.

Yahoo, in response, said Icahn has an "inaccurate interpretation" of its employee retention plan but didn't elaborate. "Mr. Icahn's suggestion that we cancel our retention plan would have a destabilizing impact on Yahoo," it said.

It also said Icahn has no "credible plan to operate Yahoo" if he wins his proxy campaign.

It reiterated that it is "open to any transaction including a sale to Microsoft if it is in the best interests of shareholders," but said it would be "ill advised" to name a price that it might be willing to accept.

Microsoft declined to comment.

"In my opinion, Microsoft does not believe you will ever sell the entire company on a friendly basis," said Icahn in his letter. "So why don't you stop dancing around the subject and publicly offer to sell the company to Microsoft for $34.375 per share and promise to cooperate completely?"

Icahn declined to say whether he has held discussions with Microsoft or Google.