defa14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14A-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. __)
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(1) Title of each class of securities to which transaction applies: |
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Yahoo! Inc. mailed the following letter to its stockholders on July 14, 2008.
July 14, 2008
Dear Fellow Stockholder:
We have written to you before to explain why we believe your Board of Directors has the knowledge,
experience, independence and commitment to best represent the interests of all Yahoo! stockholders.
We have also told you why we believe the slate of directors advanced by Carl Icahn is not the right
answer for Yahoo!.
When Mr. Icahn began his proxy contest he had no articulated plan for Yahoo! other than a sale of
the Company to Microsoft. Today he still lacks a plan that makes sense for Yahoo! stockholders. On
Monday, July 7, Mr. Icahn announced that he and Microsoft had engaged in conversations he claimed
could lead to a transaction between Yahoo! and Microsoft if his slate is elected. In what was
clearly a coordinated approach, Microsoft promptly followed Mr. Icahns announcement with its own
press release, stating that if but only if a new Board of Directors is elected, it might be
interested in discussing either a transaction involving only Yahoo!s valuable search assets or an
acquisition of the entire Company (something Microsoft had refused to discuss with your Board for
months).
The fact that Microsoft and Icahn had indeed teamed up to serve their own ends became entirely
clear the evening of Friday, July 11, when Microsoft and Mr. Icahn jointly proposed a new complex
restructuring of Yahoo! that would include the acquisition of Yahoo!s search business by
Microsoft. Your Board of Directors was given less than 24 hours to accept the proposal, the
fundamental terms of which Microsoft and Mr. Icahn made clear they were unwilling to negotiate.
After reviewing the proposal with our legal and financial advisors, your Board of Directors
determined that accepting the proposal is not in the best interests of our stockholders.
The Boards rejection of the new proposal was based on a number of factors, including the
following:
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Yahoo!s existing business plus its recently signed commercial agreement with Google
has superior financial value and less complexity and risk than the Microsoft/Icahn
proposal. |
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The Microsoft/Icahn proposal would preclude a potential sale of all of Yahoo! for a
full and fair price, including a control premium. |
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The major component of the overall value per share asserted by Microsoft/Icahn would be
in Yahoo!s remaining non-search businesses which would be overseen by Mr. Icahns slate of
directors, which has virtually no working knowledge of Yahoo!s businesses. |
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The Microsoft/Icahn proposal would require the immediate replacement of the current
Board and removal of the top management team at Yahoo!. Your Board believes these moves
would destabilize Yahoo! for the up to one year it would take to gain regulatory approval
for this deal. |
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701 First Avenue Sunnyvale, CA 94089 phone 408 349-3300 fax 408 349-3301
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yahoo.com |
We believe that this odd and opportunistic alliance of Microsoft and Carl Icahn has anything but
the interests of Yahoo!s stockholders in mind. Clearly, Microsoft, having failed to advance in
search, is aligning with the short-term objectives of Mr. Icahn to coerce Yahoo! into selling its
core strategic search assets on terms that are highly advantageous to Microsoft, but
disadvantageous to Yahoo! stockholders. It is ludicrous to think that your Board would accept this
take it or leave it proposal under which we would restructure the Company and hand over to
Microsoft Yahoo!s valuable search business and to Carl Icahn the rest of the Company with less
than 24 hours to respond. We remain open to any transaction that delivers full value to our
stockholders we just do not believe such a transaction should be dictated by Microsoft and a
single short-term investor.
In addition, Microsofts position that it would not deal with, or otherwise engage with, Yahoo!s
management to reach agreement on this proposal or to implement it, is completely absurd and
irresponsible given the complexity of the deal one that requires the removal of half of Yahoo!s
business from Yahoo! and then its integration into Microsoft.
In contrast, your Board of Directors points out that a transaction to acquire the whole Company
would be much more straightforward and involve far less risk than the new proposal or any similar
alternative. The Board believes a whole company transaction could be negotiated and executed prior
to August 1st. In communicating with Microsoft and Mr. Icahn our position with regard to
their search and restructuring proposal, your Board not only repeated its offer to sell the entire
Company to Microsoft for at least $33 per share, but also offered to negotiate an improved search
only transaction. Microsoft rejected both offers.
Ironically, Mr. Icahn, who jointly with Microsoft developed and presented this proposal, had
previously urged Yahoo! not to sell its search business to Microsoft. Specifically, in an interview
on CNBCs Fast Money program, on June 4, 2008, Mr. Icahn said, ... its crazy for this company now
to do this alternative deal and give the store away, because obviously, an alternative deal is a
poison pill because once youve done an alternative deal and given the search to Microsoft, you
dont need Microsoft to buy you anymore. So, that would be a poison pill....
Significantly, the Board also believes Microsoft and Mr. Icahn are overstating the value their
search and restructuring proposal would deliver to Yahoo! stockholders and substantially
understating the risks. A transaction that would separate the Companys search and display
businesses is an undertaking of great complexity. While this most recent proposal contains a number
of improvements over Microsofts earlier proposal, your Boards conclusion that the current
proposal is not in the best interests of stockholders is based on the following factors in addition
to those we set forth above:
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The revenue guarantees suggested, which are conditional and subject to reduction, are
well below the search revenue that the Company is expected to generate on its own and in
association with its announced commercial agreement with Google. That agreement alone is
estimated to generate $250 to $450 million of incremental operating cash flow for the first
twelve months following implementation, while allowing Yahoo! to remain a principal in paid
search; |
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The success of the remaining Company is critically dependent on Microsofts ability to
effectively monetize search; |
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Microsoft/Icahns proposed traffic acquisition costs rates are below market; |
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The proposal calls for Yahoo! to sell its industry-leading algorithmic search business
and its related strategic and valuable intellectual property portfolio for no incremental
consideration; and |
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Many of the components of the headline value that Mr. Icahn and Microsoft put forward,
such as the spin-off of Yahoo!s Asian assets and the return of cash to stockholders, are
steps that could be taken by Yahoo! on its own, and the Board continues to evaluate these
options. |
The choice for Yahoo! stockholders is clear: turn your Company and its uniquely valuable
combination of assets over to Carl Icahn and his nominees and allow Microsoft and Mr. Icahn to
dismantle the Company and deliver our search business to Microsoft on terms that would be
disadvantageous to Yahoo! stockholders, or re-elect your experienced and dedicated Board with a
clear strategy and a demonstrated commitment to create value for Yahoo! stockholders. We are
prepared to let you, our stockholders, not Microsoft and Carl Icahn, decide what is in your best
interests and we look forward to the upcoming vote.
We strongly urge you to vote your WHITE Proxy Card today for your current Board of Directors.
Thank you for your support.
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Roy Bostock
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Jerry Yang |
Chairman of the Board
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Chief Executive Officer |
If you have any questions about voting your shares, please contact:
105 Madison Avenue
New York, New York 10016
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
Email: yahoo@mackenziepartners.com
Non-GAAP Financial Measures
This letter refers to operating cash flow (operating income before depreciation, amortization of
intangible assets, and stock-based compensation expense, or OCF), which is a non-GAAP financial
measure. The most comparable GAAP measure is income from operations. With respect to the OCF
numbers provided in this release, the estimate of income from operations is the same as the
estimated OCF, as the Company does not expect to incur any additional depreciation and amortization
or stock-based compensation expense related to the Google agreement.
Forward-Looking Statements
This letter contains forward-looking statements that involve risks and uncertainties concerning
Yahoo!s projected financial performance as well as Yahoo!s strategic and operational plans.
Actual results may differ materially from those described in this letter due to a number of risks
and uncertainties. The potential risks and uncertainties include, among others, the expected
benefits of the commercial agreement with Google may not be realized, including as a result of
actions taken by United States or foreign regulatory authorities and the response or acceptance of
the agreement by publishers, advertisers, users and employees; the implementation and results of
Yahoo!s ongoing strategic initiatives; the impact of organizational changes; Yahoo!s ability to
compete with new or existing competitors; reduction in spending by, or loss of, marketing services
customers; the demand by customers for Yahoo!s premium services; acceptance by users of new
products and services; risks related to joint ventures and the integration of acquisitions; risks
related to Yahoo!s international operations; failure to manage growth and diversification; adverse
results in litigation, including intellectual property infringement claims; Yahoo!s ability to
protect its intellectual property and the value of its brands; dependence on key personnel;
dependence on third parties for technology, services, content and distribution; general economic
conditions and changes in economic conditions; potential continuing uncertainty arising in
connection with the withdrawal of Microsofts unsolicited proposal to acquire Yahoo! and the
announced intention by a stockholder to seek control of your Board of Directors; the possibility
that Microsoft or another person may in the future make another proposal, or take other actions
which may create uncertainty for our employees, publishers, advertisers and other business
partners; and the possibility of significant costs of defense, indemnification and liability
resulting from stockholder litigation relating to the Microsoft proposal. More information about
potential factors that could affect Yahoo!s business and financial results is included under the
captions Risk Factors and Managements Discussion and Analysis of Financial Condition and
Results of Operations in Yahoo!s Annual Report on Form 10-K for the fiscal year ended December
31, 2007, as amended, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2008,
which are on file with the Securities and Exchange Commission (SEC) and available at the SECs
website at www.sec.gov. All information in this letter is as of July 14, 2008, unless otherwise
noted, and Yahoo! does not intend, and undertakes no duty, to update or otherwise revise the
information contained in this letter.