In its latest bid to thwart an attempt by billionaire investor and shareholder Carl Icahn to take over its board of directors, Yahoo Inc. yesterday sent a filing to the U.S. Securities and Exchange Commission detailing the employee severance plan that would kick in if the company were acquired by another entity. Yahoo recently has come under fire from Icahn over the severance plan, which was disclosed in a shareholder lawsuit.
Yahoo said it posted the information it shared with the SEC, which was in the form of an FAQ, on the company's intranet the same day.
On its face, the disclosure might seem a bit unusual, but according to one analyst, it was an attempt by Yahoo to publicly disseminate information it thought it had already made public.
"Yahoo [previously] made a statement that the severance plan was a matter of public record and that it had been widely communicated. But nobody I knew who covered this was aware of what [Yahoo] was talking about," said Rob Enderle, an analyst at San Jose-based Enderle Group.
Enderle said the fact that Yahoo released the information to its employees and filed it with the SEC yesterday indicates that the company had not widely disclosed it. However, Enderle said he didn't think Yahoo deliberately withheld the information. Rather, Yahoo probably thought it had disclosed the information then realized it hadn't, and then scrambled to make the information public, he said.
"It looks incredibly inept, and going into a battle with Carl Icahn looking inept is not a good strategy, Enderle said.
Yahoo could not be reached for comment.
On Monday, shareholders suing Yahoo over its handling of Microsoft Corp.'s acquisition attempt asked the judge (download PDF) to invalidate the controversial employee severance plan before the company's annual shareholders meeting on Aug. 1.
The plaintiffs claimed that Yahoo directors and top managers didn't want to sell the company to Microsoft in order to protect their own interests, and, in violation of their fiduciary duty to shareholders, they adopted a "poison pill" severance plan to sabotage the merger negotiations.
The severance plan was approved Feb. 12, shortly after Microsoft made its original offer to acquire Yahoo on Feb. 1 and would be triggered by a change in control of the company, the plaintiffs said. It would also require shareholders to re-elect the current board members in order to prevent the plan from being activated, the plaintiffs said. They also claimed that the plan would trigger a mass employee exodus.
Icahn is waging a proxy fight to persuade shareholders to boot out Yahoo's directors and replace them with his slate of candidates in the hope that a new board can entice Microsoft back to the negotiating table.
According to Icahn, the employee severance plan would cost an acquirer $2.4 billion, a figure Yahoo disputed in its SEC filing, saying a cost estimate would be based on a number of unknown variables. Yahoo said Icahn's figure assumes that all Yahoo employees leave the company. Using the same analysis that was cited by Icahn and in the shareholder lawsuit, the severance plan would cost $845 million if 30% of employees leave the company "without cause," or $514 million if 15% leave, Yahoo said.
Yahoo also said that, contrary to Icahn's interpretation of the plan, it did not implement it to "thwart a deal with Microsoft." Instead, Yahoo said the plan was intended to help retain employees and preserve the value of the company during a "period of uncertainty," without acting as a barrier to a takeover bid.
In addition, Yahoo said the board can't terminate or cancel the severance plan, despite Icahn's call for the company do so. Yahoo said if a new board of directors is elected, that board could not modify or repeal the plan for two years. If the current board is re-elected, the plan would stay in effect until the board modified or terminated it. However, if Icahn were to abandon his proxy fight, the current board could terminate the plan one month after he abandoned his fight.
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