Yahoo Inc said on Wednesday that deal talks are ongoing with Microsoft Corp as the company resisted an attack by billionaire critic Carl Icahn, who called its recent actions "deceitful."
Yahoo President Susan Decker trumpeted new ad partnerships with Wal-Mart Stores Inc and others as Icahn, an activist investor, stepped up pressure on Yahoo over its rebuff of Microsoft's $47.5 billion buyout offer.
She said some form of deal with Microsoft could still come about, sending Yahoo shares up 2.7 per cent for the day, despite Icahn's later blistering attack on Chief Executive Jerry Yang's leadership at Yahoo.
In an invective-filled letter to Yahoo, Icahn used terms like "deceitful," "self-destructive," "misleading" and "insulting to shareholders" for moves by Yang and the board to retain employees in a severance plan likely to make a deal with Microsoft more costly.
He called on Yahoo to rescind anti-takeover defenses and merge with Microsoft, writing "even I am amazed at the length Jerry Yang and the Yahoo board have gone to in order to entrench their positions and keep shareholders from deciding if they wished to sell to Microsoft."
Yahoo fired back, in kind, saying Icahn's attack on the company "seriously misrepresents and manipulates the facts" regarding dealings between Microsoft and Yahoo and that it relied on allegations from an error-filled lawsuit.
The company labeled as "patently untrue" key assertions contained in the complaint filed by lawyers for two Detroit pension funds who seek to unwind its anti-takeover defenses in order to force Yahoo to accept a full Microsoft merger deal.
"Notably, you accuse us of turning down a $40 per share offer and 'sabotaging' a $33 per share offer," Yahoo Chairman Roy Bostock said in a reply to Icahn that argues he lacks a credible plan for Yahoo other than selling out to Microsoft.
Icahn's criticisms stem from arguments made in a legal complaint attacking Yahoo that was unsealed this week and which purports to shed light on Yahoo's long resistance to Microsoft's entreaties. That suit refers to media reports that assert Yahoo rejected a $40-per-share Microsoft merger offer in early 2007 and to a $33-a-share verbal offer Microsoft has said it made early last month that was again rebuffed by Yahoo.
Icahn has proposed an alternate board ahead of Yahoo's annual meeting on August 1. He told cable business channel CNBC later on Wednesday that "we have good odds" in the Yahoo proxy battle and said an alternate deal in which Microsoft would buy only parts of the company would not serve shareholders.
War of words heats up
Decker told the Advertising 2.0 conference in New York that a deal could happen in many forms. "There are ongoing, engaged conversations," she said. "There are many ways in which a combination with Microsoft could be very beneficial."
But some Wall Street investors say Icahn cannot be easily denied. "Carl is a very, very tough adversary to have. They (Yahoo) should have taken him more seriously in the beginning," bankruptcy specialist Wilbur Ross told Fox Business News.
Decker defended Yahoo's severance plan, saying it was meant to keep intact its employee base, a key asset of any deal it might hope to make. She stopped short of saying whether Yahoo's talks with Microsoft concern a full merger or a partial deal.
Talks between Yahoo and Microsoft are focused on finding a price for buying Yahoo's search business, and these discussions are likely to conclude in the "next week or so," a person familiar with the discussions told Reuters on Wednesday.
Some of the finer points under discussion include what Microsoft would pay Yahoo for the right to run advertising alongside Yahoo search queries, the source said.
Separately, Yahoo continues to talk with Google Inc, and could end up striking a deal with the Web search giant if Microsoft and it do not reach terms, the source said.
Yahoo's new ad deals include a multi-year partnership with Wal-Mart to be the primary ad sales channel for Walmart.com. Yahoo will become the exclusive portal to resell the site's display inventory. In another deal, Yahoo signed up the digital unit of advertising holding company Havas.
A third agreement calls for Yahoo to carry CBS Corp content, like clips from TV shows, as part of a broader plan by the media company to add new outlets for its TV programs.
Yahoo is also adding 94 titles to its newspaper advertising consortium, bringing the total to 779. Among other things, Yahoo provides technology to serve up brand advertising on the websites of newspapers working to offset lost classified ad revenue.