Yahoo Responds to Carl Icahn
Dear Mr. Icahn: We are in receipt of your letter with regard to your intention to seek control of Yahoo!'s board of directors. 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. A fair-minded review of the factual
record leads to one conclusion: that Yahoo!'s ten-member board,
comprised of nine independent directors along with Yahoo! CEO Jerry
Yang, remains the best and most qualified group to maximize value for
all Yahoo! stockholders. Conversely, we do not believe it is in
the best interests of Yahoo! stockholders to allow you and your
hand-picked nominees to take control of Yahoo! for the express purpose
of trying to force a sale of Yahoo! to a formerly interested buyer who
has publicly stated that they have moved on. Please may I remind you
that there is currently no acquisition offer on the table from that
company or any other party. That said, we have been crystal clear in
our stance that we have been and remain willing to consider any
proposal from any party including Microsoft if it offers our
stockholders full and certain value. From
the beginning of the process with Microsoft, Yahoo!'s independent
directors focused on one central goal: how best to maximize stockholder
value. At all times directing this process, Yahoo!'s independent
directors carefully considered Microsoft's initial unsolicited
proposal, which was at the time valued at $31 per share. After
considering input from its financial advisers the board unanimously
concluded that Microsoft's proposal significantly undervalued Yahoo!
and was, therefore, not in the best interests of the company or our
stockholders. While we rejected this offer publicly on February 11,
2008, we could not have been more clear in that communication and in
every subsequent communication, both public and private, that we were
and are willing to enter into any transaction that would maximize value
for stockholders and provide them certainty of value. The
record of our efforts to engage Microsoft in meaningful discussions is
unequivocal. Following receipt of Microsoft's proposal on January 31,
our board of directors has met over twenty times to review Microsoft's
proposal and Yahoo!'s other strategic alternatives. Throughout this
process our board kept an open mind and an open ear. Our independent
directors met with several of our largest stockholders to solicit their
views and to make it clear that Yahoo!'s independent board is fully
committed to maximizing stockholder value. In addition, at the
direction of our board, our management team met with many of our
investors to provide insight into Yahoo!'s strategy and views on value.
Our
board's openness also extended to Microsoft. Without reciting all of
the contacts between us and between our advisers, the senior-most
management of Yahoo! and Microsoft and the companies' respective
financial advisers spoke on numerous occasions and met in person seven
times. During those meetings, Yahoo! discussed its strategic objectives
in search and display advertising monetization, its perspectives on
operating strategy and integration in a transaction with Microsoft, its
perspectives on transaction synergies, and other non-price deal terms.
Because certainty of closing is a critical issue, we sought to
understand Microsoft's thinking with regard to the regulatory issues
associated with a potential transaction. In fact, at the board's
direction, our lawyers on March 28 asked for additional information in
this regard, information which was never forthcoming. On
April 15th, a meeting was held at Yahoo!'s request. At that meeting,
which included our respective financial advisors, we made clear, once
again, that we were open to a transaction with Microsoft. During those
discussions, Yahoo! made a detailed presentation of its strategic and
financial plan, its thoughts on integration and its view with respect
to the potential synergies that could be achieved in a transaction,
essentially laying the foundation for Microsoft to understand--and
respond to--our board's conclusion that Microsoft's offer substantially
undervalued the company. Following that meeting we also provided to
Microsoft a list of key non-price deal terms that our board believed
were critical items to be addressed in a deal to provide reasonable
protections for our stockholders. Throughout
this period, Microsoft continued to state that it would not raise its
offer, and even suggested that it could lower it. Despite this
failure by Microsoft to respond in any substantive way to any of
Yahoo!'s requests, on May 2nd, the same day we first learned of
Microsoft's apparent willingness to increase its proposal to $33
(although this oral "offer" was never delivered in writing and did not
include details of a cash/stock mix), our board determined to continue
discussions, instructing Jerry Yang to indicate to Microsoft that we
would be prepared to enter into a transaction that valued Yahoo! at $37
per share and that provided reasonable certainty of value and certainty
of closing. This was communicated to Microsoft in-person at a meeting
in Seattle on May 3rd. With Microsoft's offer at $33 and Yahoo!'s
counter-proposal at $37, Microsoft elected, within hours, to walk away
from the negotiating table and informed us that they were "moving on,"
having never engaged further on price or any of the key non-price deal
terms. In
short, Yahoo!'s board was at every point in this process prepared to
enter into a transaction with Microsoft that would maximize stockholder
value--and included certainty of value and closing. What Yahoo!'s
independent board refused to do was to allow control of this company to
be acquired for less than its full value. That brings us to
today. Our business is performing well as evidenced by our first
quarter results. As we have publicly stated, our board continues to
actively and expeditiously explore strategic alternatives to maximize
stockholder value. None of the alternatives we are considering would
preclude us from entering into a transaction with Microsoft or any
other party. We
continue to believe that Yahoo!'s current board has the independence,
the knowledge, and the commitment to navigate the Company through the
rapidly changing Internet environment and to deliver value for Yahoo!
and its stockholders. We look forward to a productive dialogue. Very truly yours, Roy Bostock Chairman of the Board
SOURCE: Yahoo! Inc. Yahoo! Inc.
Brad Williams, 408-349-7069 (Media)
bhw@yahoo-inc.com
Marta Nichols, 408-349-3527 (Investors)
mnichols@yahoo-inc.com
or
The Abernathy MacGregor Group for Yahoo! Inc.
Adam Miller, 212-371-5999 (Media)
alm@abmac.com
Winnie Lerner, 212-371-5999 (Media)
wal@abmac.com
6:20:07 PM 
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