Yahoo Sends Employees FAQ On Severance Plan….. The Spin Is Making Me Dizzy

In an attempt to spin things in a way that favors them present its side of the story, Yahoo has sent out an FAQ on its controversial severance plan to its employees. If you recall, Carl Icahn has accused Yahoo of creating the plan to make the company unattractive to buyers by acting as a $2.4 Billion “poison pill” if there was a change in control at the company. Yahoo disputes that in the FAQ:

“Mr. Icahn says this Plan costs $2.4 billion. Is that what it actually costs?

No. An estimate of the amount, if any, payable under the Plan requires making assumptions about unknown facts and variables including: (1) the number of employees who terminate employment without Cause or for Good Reason within the two years following any Change in Control, (2) each such employee’s job level and base salary, (3) the number of equity awards held by each such employee on their respective severance date, the portion of those awards that are not otherwise vested on that date, and the applicable exercise price of any option awards, (4) the market price of the Company’s common stock at the time such awards are ultimately exercised or paid, and (5) the length and level of reimbursement for health care benefits and outplacement services utilized by each such employee.

Mr. Icahn quotes the $2.4 billion estimate, taken out of context, from a complaint filed in litigation against the company. This number is necessarily based on a number of assumptions, including the assumption that all of Yahoo!’s employees are terminated without Cause or leave for Good Reason following a Change in Control. No one believes that such an assumption is reasonable. For the record, the same preliminary analysis referenced in the lawsuit and relied on by Mr. Icahn and using the same assumptions (including a $35 per share stock price) as those underlying the $2.4 billion figure showed that the total payout would be $845 million or $514 million, assuming that 30% or 15% of the employees, respectively, are terminated without Cause or leave for Good Reason following a Change in Control.”

They also toss this in as well:

If Yahoo! remains an independent company and no Change in Control occurs, what happens to the Plan?

The Plan stays in effect until the Yahoo! Board of Directors modifies or terminates the Plan.”

I think that translates to “if we win the proxy fight, the severance plan will be canceled.” Of course, that assumes that angry shareholders don’t have it canceled first.

Expect Icahn to fire back at Yahoo at any time.

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