Carl Icahn Ends eBay Fight While Receiving Little

Icahn ends eBay fight

Carl Icahn’s battle with eBay Inc (NASDAQ:EBAY) has ended in a negotiated settlement that includes a confidentiality agreement muzzling the activist investor’s blusterous attacks against the e-commerce company.

Icahn agrees to confidentiality agreement muzzling his vocal attacks

Icahn had fought for eBay Inc (NASDAQ:EBAY) to spin off PayPal and proposed two of his handpicked independent directors, who had been identified as somewhat hostile to the eBay board.  Icahn and eBay agreed to end Icahn’s proxy battle which was set to come to a head this May with a vote of shareholders.  Icahn and eBay agreed to a confidentiality agreement and eBay said they would appoint former AT&T Inc. (NYSE:T) CEO, non-executive chairman of Motorola and current chairman of CVS Caremark Corporation (NYSE:CVS) as an independent director.

“Clear win”

“It was a clear win,” eBay Inc (NASDAQ:EBAY) CEO John Donahoe let slip in an interview with Bloomberg’s Erik Schatzker, a sheepish smile on his face.  When addressing the confidentiality agreement he offered Icahn, Donahoe said, “It’s something we would offer to any large shareholder and is rather straightforward,” noting that the agreement would make Icahn “longer term in his orientation.”  On CNBC Donahoe had indicated he anticipated that Icahn would remain in the stock as the long term, a view that is not universally accepted.

Personal tone

Icahn’s battle with eBay had taken a personal tone from the start. Rather than focus on the specifics of his proposal, Icahn had made blusterous statements impugning on the reputations of eBay board members, particularly Marc Andreessen, and his involvement in a business deal where he bought Skype from eBay Inc (NASDAQ:EBAY) and later sold it to Microsoft Corporation (NASDAQ:MSFT) for a handsome profit – an issue entirely unrelated to eBay’s potential spinoff of PayPal.

When Schatzker asked if Icahn had used bullying tactics with eBay, Donahoe said in their behind the scenes conversations Icahn was respectful.  In his public comments, Icahn had also attacked the reputation of Donahoe.  In one press release, Icahn had said “if eBay were a private company, Donahoe would be fired…”  When speaking about eBay’s sale of Skype to Andreessen Icahn said “…Donahoe is either incompetent or negligent or, perhaps even worse, was simply taking the easy path of bowing to the wishes of a respected and powerful board member.”

Is new board member member of corporate “boys club?”

Icahn had also said that Donahoe was a corporate member of the “boys club.” What Icahn got in independent director Dorman was a corporate insider unlikely to rock the board in the fashion Icahn had proposed — a corporate conformist, it would seem.

Speculation before the announcement was that Icahn was on track to lose his proxy vote scheduled for mid-May, with indications that eBay Inc (NASDAQ:EBAY) had received private survey results showing Icahn was headed for a major loss. “Why give Icahn anything?” Shatzker asked of Donahoe as he started his interview.  Perhaps the truth is Icahn wasn’t given anything in the deal except a method to save face.



About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com