DALLAS - Yahoo Inc., defending itself against Carl Icahn's bid to take control of the board, said it was right to reject Microsoft Corp.'s $47.5 billion offer and that its directors are the most qualified to boost Yahoo's value.
Icahn's views reflect a "significant misunderstanding" of Microsoft's offer, said Yahoo, whose 10 directors will be up for reelection at the July 3 annual meeting. Icahn, who owns the equivalent of 59 million Yahoo shares, said yesterday he has drawn up a slate of 10 nominees.
Yahoo chief executive Jerry Yang faces mounting pressure to reconsider his decision to rebuff Microsoft's advances. John Paulson, who runs the New York hedge fund Paulson & Co., said he will support Icahn's directors and that he was disappointed Yahoo didn't reach a deal with Microsoft. Paulson & Co. owned 50 million Yahoo shares at the end of March.
"We do not believe it is in the best interests of Yahoo stockholders to allow you and your hand-picked nominees to take control," Yahoo chairman Roy Bostock said in a letter to Icahn. Yahoo also said there is no offer on the table from Microsoft or any other company.
Bostock said Yahoo is willing to consider any proposals, including from Microsoft, that offer shareholders full value. He said the board met more than 20 times to review Microsoft's offer and other options. The board kept an "open mind and an open ear," Yahoo said.
Icahn said in a letter to Yahoo's board that a combination with Microsoft "is by far the most sensible path" if the Internet company wants to take on Google Inc.
"The board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft," said Icahn, 72. "I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary."
Icahn didn't immediately return a phone call seeking comment. A Microsoft spokesman said he's reviewing the statement and had no immediate comment.
Yang rejected Microsoft's $33-a-share offer this month, saying his company was worth at least $4 more. Buying Yahoo, owner of the second-most popular search engine, would have helped Microsoft compete with Google in online advertising, a market Microsoft expects to almost double to about $80 billion by 2010.
Bostock said in the letter that Microsoft's offer wasn't delivered in writing and didn't detail the mix of cash and stock. Within hours of Yang proposing a price of $37 a share, Microsoft walked away, Bostock said.
Yahoo shares rose 61 cents, or 2.3 percent, to $27.75.