Dan Loeb, CEO of Third Point Avenue, has written a letter today in which he announced plans for a proxy war against Yahoo! Inc. (NASDAQ:YHOO)‘s board.
Loeb states in the letter below that he plans to launch a battle within a week. We noted earlier today, that Loeb bought more shares of Yahoo recently. Loeb’s Third Point Avenue is currently the largest shareholder of the company.
Loeb believes that the company is extremely undervalued and that is trading at a discount to its sum of parts. Loeb stated in his fourth quarter letter obtained by Valuewalk:
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Core Yahoo forms only a modest portion of the Company’s actual value (a mere $2.00 per share, trading at ~14.49 as of 03/12/12). The after-tax value of Yahoo’s Asian assets — Alibaba and Yahoo! Japan — currently constitutes $11 per share of its value (73%), with an additional $2 per share of net cash.
Loeb in essence used the following valuation: $13/share for the Alibaba and $4/share for the rest of the core Yahoo and cash. That would imply a value of $17.
Loeb in stern words warned:
If you invite us on, we will bring strong shareholder advocacy, leading corporate governance, first class restructuring capabilities and leading media strategies to a Board that is sorely in need of each of the above. In addition, you will have avoided an unnecessary battle with your largest outside shareholder. You appear to have enough battles to fight already.
Loeb also stated the following about Yahoo!’s board:
“An unwillingness on your part to seriously consider the Shareholder Slate, choosing instead to spend the Company’s resources and management’s time fending off our bona fide efforts to make Yahoo! great again.”
Below is the full letter via-DealBook
and management’s time fending off our bona fide efforts to make Yahoo! great again. This approach is particularly nonsensical given the fact that shareholders have been clamoring for change for some time, and I do not believe that even you can realistically imagine that Yahoo!,in its current state of flux, will find four nominees that are as qualified to serve as the Shareholder Slate.In any event, the Board’s stonewalling, apparent insouciance and decision not to engage with us in a serious manner, has left us no choice but to directly approach our fellow owners with the Shareholder Slate. Accordingly, we hereby notify you that we intend to file our Preliminary Proxy Statement with the Securities and Exchange Commission within the week.Scott, it is not too late for you to take decisive leadership action and avoid the costs and distraction of an expensive proxy contest fighting the Shareholder Slate (which, according to our research, will be well-received by shareholders). If you invite us on, we will bring strong shareholder advocacy, leading corporate governance, first class restructuring capabilities andleading media strategies to a Board that is sorely in need of each of the above. In addition, youwill have avoided an unnecessary battle with your largest outside shareholder. You appear to have enough battles to fight already.On a related note, given that the Company will be without a Chairman after Mr. Bostock’s termexpires, we would be amenable to having Mr. Gary Wilson, former CFO of Disney and Marriott, remain on the Board as Chairman. We believe this role should be for one year only,with the explicit understanding that Mr. Wilson would recruit his replacement prior to the end of the term. We suggest this in the spirit of continuity and compromise, and believe it would bein the best interests of all shareholders. We encourage the Company and Mr. Wilson to stronglyconsider this idea.
Sincerely,Daniel S. Loeb