Last week, billionaire Carl Icahn issued a direct statement of his opinions and intentions to Yahoo.  Icahn, who has bought up a large stake in Yahoo and is attempting a hostile takeover to facilitate a sale and merger, expressed a great deal of frustration in the letter.   He concluded that a deal would likely be impossible without the removal of the board and CEO Jerry Yang, and that his takeover was a direct attempt to oust these parties.

He argued that Yahoo has been blocking a deal all along despite feigning willingness to bargain.  He points to measures such as the employee retention plan, which would have cost Microsoft a great deal.  The retention plan included rather extravagant provisions -- for example employees whose duties changed would be entitled not only to their new position's salary, but also to a full second salary at their former position's rate for up to 2 years.

Yahoo insists that Icahn is barking up the wrong tree, and that it is just looking out for its own best interests.  It responded in an irate letter of its own.  It opens stating, "We are in receipt of your letter of June 4 and take issue with its content."

The letter alleges Icahn is drawing his opinions from the upcoming shareholder case against Yahoo, which Yahoo alleges is nothing more than fallacious accusations.  In the letter they state, "Your letter seriously misrepresents and manipulates the facts regarding the recent events pertaining to Microsoft and Yahoo! You rely on, as “facts,” a series of unsubstantiated allegations from a complaint filed in a Delaware court which grossly misstate the very clear record and position established by the Yahoo! Board."

Yahoo's executives defend the employee retention plan in the letter, describing it as a way "to protect the company’s assets and value during a time of uncertainty."  It does acknowledge that employees who get fired or quit for "good reason" will get full pay for up to two years.  However, it is quick to point out that employees who merely quit for no reason will not be eligible.  The letter fails to address what exactly "good reason" entails.  Also, it fails to address the provisions surrounding change in responsibilities, previously mentioned, which could leave some employees collecting two paychecks.

Despite leaving out this salient information, Yahoo insists that its plan was well intentioned.  The board states, "In adopting this plan, we believe Yahoo! did the right thing for its employees and its shareholders alike.”

Perhaps most curious is the Board somewhat strangely worded denial of the allegations that Microsoft offered $40 a share informally.  They state:

Finally, you significantly misrepresent the events of the recent past. Notably, you accuse us of turning down a $40 per share offer and “sabotaging” a $33 per share offer. Again, this is patently untrue. Yahoo!’s Board of Directors has at all times been focused on maximizing shareholder value. As has been well documented, Yahoo! has engaged in thorough discussions with Microsoft over a series of months culminating in Microsoft’s decision to walk away from a potential acquisition of Yahoo!. Throughout this process, which has included an exploration of multiple strategic alternatives with multiple parties, the Board has repeatedly stated that it is open to any transaction, including a sale to Microsoft, as long as it is in the best interests of shareholders.

The first two sentences offer a curious ambiguity.  It is hard to say whether the Board is denying that there was such an offer, merely denying sabotaging the public offer, or simply denying that it turned down entirely Microsoft's alleged informal offer.  Whatever the case may be, the statement does not come off as a denial that there was such an offer, not a carefully worded one at least.

The letter also points out that Yahoo has reached out to Microsoft in previous weeks, publicly declaring its hopes for more talks.  It says Microsoft was dismissive and had no interest in a new deal.  The letter closes on an angry note accusing Icahn of trying to sabotage the company and having no plan.  It states:

Conspicuously absent from your letter is any credible plan for Yahoo! other than a repetition of your insistence that the Company should sell itself to Microsoft. Indeed, your stated view that “the only way to salvage Yahoo! in the long if not short run is to merge with Microsoft” demonstrates that you have no other plan and causes one to wonder what exactly would happen to our Company if you and your nominees were to take control of Yahoo!.

However, whether the Board's or Icahn's accusations prove true, the Board must realize that it may indeed be left wondering as Icahn's takeover attempt appears to stand a fair chance of succeeding.  If Yahoo cannot quell dissent among the shareholders, its leadership may soon be deposed, but as their letter shows, they're not willing to leave quietly.