The war of words between eBay and its new shareholder Carl Icahn continues to rage on. Today, eBay issued a notice of an upcoming annual meeting, in which the company asked shareholders flat out to vote against Icahn’s proposal to spin off PayPal. Meanwhile, Icahn issued yet another open letter against current eBay management, in which he accused CEO John Donahoe of “inexcusable incompetence” that cost stockholders $4 billion.
Carl Icahn has also proposed adding two employees from the Icahn Group to eBay’s board. (Icahn currently owns 2.15% of eBay as of February 18.) eBay has also asked shareholders to reject that proposal.
On the subject of new board members, eBay notes: “The Board of Directors does not endorse any Icahn Group nominee or the Icahn Proposal and unanimously recommends that you vote on the WHITE proxy card or voting instruction form ‘FOR ALL’ of the nominees proposed by the Board of Directors and ‘AGAINST’ the Icahn Proposal,” Michael R. Jacobson, company secretary, writes in the SEC filing. “The Board of Directors strongly urges you not to sign or return any proxy card sent to you by the Icahn Group.”
And on the subject of the spinoff proposal, it is equally unequivocal: “The Board has carefully considered this proposal and has unanimously agreed that spinning off the Payments segment (PayPal) into a separately traded public company would not be in the best interests of eBay or its stockholders,” it writes. “The Icahn Proposal is not a new idea to the Board or the Company. The Board, together with management and external advisers, has assessed a spin-off of PayPal several times and continues to believe that each of the Company’s payments and commerce segments are stronger together than apart and see compelling benefits to keeping them together. Therefore the Board recommends that you vote AGAINST the Icahn Proposal.”
From the looks of it, the Icahn letter doesn’t reveal materially any more information than previous statements from the activist investor but it’s mainly about making sure that they continue to have a fresh statement to match those of eBay: it centers specifically on the sale of Skype at what Icahn believed was not a fair price. He claims that Donahoe and his advisers should not have spun off the asset to a consortium that included Andreessen Horowitz, and should have instead settled outstanding intellectual property issues itself and sold the asset directly to Microsoft (or another interested party).
eBay and key people associated with the company have also explained why the split does not make sense. eBay has highlighted the synergies between the two companies and also how a lot of PayPal’s growth is supported by eBay; while Reid Hoffman argued convincingly about the choice between short-term profit and long-term value creation.
PayPal has recently started rolling out a new website, and it accounted for around 40% of eBay’s $16 billion in revenues in 2013.
The timeline so far, as outlined by eBay in its filing today:
On January 16, 2014, eBay received a notice from the Icahn Group indicating that it intended to nominate two Icahn Group employees to stand for election as directors to the eBay Board of Directors at eBay’s 2014 Annual Meeting. The notice also included a precatory proposal recommending that eBay act expeditiously to engage an investment banking firm to effectuate a spin-off of eBay’s Payments segment into a separately traded company.
On January 17, 2014, the Icahn Group notified eBay by letter that it had filed a notice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or HSR Act, to enable the Icahn Group to acquire more than $700 million of eBay’s common stock, including any shares that the Icahn Group may already own. On each of January 17 and January 22, 2014, Carl Icahn and John Donahoe, eBay’s President and Chief Executive Officer, had telephone conversations concerning the Icahn Group’s perspectives on eBay and the upcoming annual meeting. No agreements or understandings resulted from these conversations.
On January 22, 2014, in connection with eBay’s earnings release and associated conference call, eBay publicly announced that it had received the notice from the Icahn Group regarding the 2014 Annual Meeting.
On February 11, 2014, the Icahn Group delivered to eBay an update to its January 16, 2014 notice that included revised biographical information regarding one of the Icahn Group’s proposed nominees and indicated that the Icahn Group had acquired call options that conferred beneficial ownership of approximately 2.15% of eBay’s outstanding common stock.
On February 18, 2014, the Federal Trade Commission granted early termination of the HSR Act waiting period to the Icahn Group. Later that day, the Icahn Group notified eBay by letter that it had exercised its call options resulting in the Icahn Group having beneficial ownership of approximately 2.15% of eBay’s outstanding common stock.
On February 22, 2014, Mr. Icahn spoke with Mr. Donahoe by telephone.
On February 24, 2014, the Icahn Group issued an “open letter” to eBay stockholders that contained various allegations regarding eBay’s Board and seeking support for the Icahn Proposal. eBay responded later that day with a press release stating that the Board welcomed discussion of the Icahn Proposal and rebutting the allegations contained in the Icahn Group’s letter.
On February 26, 2014, the Icahn Group submitted a demand to inspect the Company’s books and records pursuant to Section 220 of the Delaware General Corporation Law (the “Icahn Demand”) and on February 28, 2014 submitted a demand to inspect certain eBay stocklist materials. eBay subsequently offered by letter to provide the Icahn Group with documents responsive to their Section 220 demands.
In early March 2014, Mr. Donahoe and Mr. Icahn spoke by telephone and subsequently had an in-person meeting during which additional representatives of both parties were present.
Throughout January, February and March, the Icahn Group and the Company published various solicitation materials.