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Yahoo Spells Out Latest Rejection; Icahn Goes Back To Proxy Fight, Says Yahoo Misled Investors

In a new slideshow filed with the SEC, Yahoo (NSDQ: YHOO) has put out the exact details of the fresh offer from Microsoft (NSDQ: MSFT) and Icahn, with an explanation of why it was inadequate. The basic details:

— Microsoft would pay $1 billion upfront for Yahoo’s search assets. That’s the same as before, and Yahoo says it would be too complex to separate these assets, and beyond that, the money is taxable.

— Microsoft and Yahoo would enter into an exclusive search ad agreement guaranteed for the next five years. It would pay Yahoo at least $2.3 billion. TAC (traffic acquisition costs) for the first three years would be 85 percent, dropping to 70 percent for the two years following. Yahoo still says this is below its own revenue estimates and that TAC is below market.

— After the first five years are up, Microsoft could renew for another five years at 70 percent TAC if it’s willing to guarantee at least $3 billion in annual revenue. Yahoo has the right to renew for five more years, but with a guarantee of just $1.6 billion.

The presentation spells out the calculus used by Icahn and Microsoft to claim that their latest offer would end up delivering $33 per share worth of value to Yahoo shareholders. Basically, it involves a spinoff of the Asian assets worth $9 per share, a $4.50 per share special dividend, and an estimated value of $19.50 for the remaining Yahoo shares they would still own. Yahoo rejects this math, saying the spinoff would not be so high, and that when you factor in the regulatory timing, the taxes and the damage to the business, the value would not be worth so much.

Meanwhile, Icahn has definitively nominated own slate. In a separate filing, Icahn argues that Yahoo’s Saturday night rejection was misleading. Yahoo was offered more than a 24-hour window to respond — but only if they would delay (yet again) their annual meeting. He also says that the latest offer included the possibility of keeping members of the board and CEO Jerry Yang.