EBay today issued a letter to its shareholders asking them to reject the two men nominated by Carl Icahn for election to the company's board of directors.
The company included the letter with its proxy statement filed ahead of its May 13 shareholder meeting. The letter was from eBay's Board of directors and covered why they believe PayPal should be retained. Icahn is adamant that the online pay service be spun off and he is hoping to stack the board of directors with people of a similar mind.
"At our 2014 annual meeting, you have important choices to make. Activist investor and eBay shareholder Carl Icahn has submitted a non-binding proposal to spin off PayPal into a separately traded public company. He also has nominated two of his employees for election to eBay's board," the letter stated.
The letter goes on to say that the Icahn's proposed board members, Jonathan Christodoro and Daniel Ninivaggi, would be nothing more than bodies through which Icahn will try to impose his will on eBay.
"Both are overboarded under eBay's policies - both of them are already on four public company boards, and Mr. Ninivaggi is a Co-CEO of one of Mr. Icahn's controlled companies. Mr. Christodoro is a recent graduate of business school with a few years of experience on Wall Street. He joined all four of his boards following Icahn pressure on those companies and has less than one year on average of experience on each board he has served on. Both individuals are contractually bound to Icahn affiliates and are required to hold business opportunities and investments in a fiduciary capacity for the benefit of those Icahn affiliates, preventing them from being truly independent directors," the board said.
The eBay directors also listed why idea of spinning of PayPal should be rejected.:
- PayPal Grows Faster Because of eBay
- eBay Accelerates the Success of PayPal
- Data Sharing Leads to More Profitable Growth
- eBay Inc. Provides Efficient Capital for PayPal
- Commerce and Payments are Converging
"We also have had many discussions with shareholders. Our board is in unanimous agreement that neither Mr. Icahn's breakup proposal nor his nominees are in the best interests of eBay's shareholders. The eBay Board of Directors unanimously recommends that shareholders vote "AGAINST" Mr. Icahn's breakup proposal and "FOR" all four of the company's experienced and highly qualified director nominees: Fred Anderson, Edward Barnholt, Scott Cook, and John Donahoe."
After spending months demanding a complete spin off of PayPal, Icahn did pull back a bit the other day. He altered his proposal saying eBay should offer an IPO for PayPal in which it would become 20 percent publicly owned with the remaining portion owned by eBay.
"The 20% IPO structure should alleviate any concern of lost synergies. All of the 'secret sauce' and 'flywheels' would be preserved. A 20% IPO of PayPal could allow for all of the benefits of an independent PayPal, preserves all of the benefits of keeping PayPal in-house and could be structured so as to be tax free to shareholders," Icahn said on his blog.
