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Does severance spell deliverance? Carl Icahn says Yahoo has hit a “new low” with its recently-adopted employee severance plan. Certainly, it presents a formidable obstacle to anyone taking a crack at the internet portal. The plan itself cannot be rescinded while Yahoo is embroiled in a proxy fight.

Yahoo stresses the plan is not a poison pill. But it sure does smell like shark repellant. It is triggered by a change of control, which includes simply voting off a majority of the current board. Generous to a fault, it gives employees the right to resign with lavish pay-offs up to two years afterwards for “good reason” – a term providing a good deal of wiggle room. While claims that the plan could cost a potential acquirer $2.4bn look extreme, the resulting uncertainty over the ability to reshape the company could be enough to deter any buyer.

Mr Icahn’s latest salvo comes a week after a Yahoo filing made clear that the severance package would be triggered if the current board lost a proxy fight. The arch-activist perhaps recognises the plan all but wrecks the possibility of a majority of Yahoo’s shareholders backing his ouster of the board, and is venting his spleen.

However, his righteous indignation may yet serve a tactical purpose. Yahoo’s other investors know that a renewed bid from Microsoft presents the best option for achieving a premium valuation for their shares. But even though the current board has proven unable or unwilling to secure a deal, shareholders realise that simply replacing them with Mr Icahn’s team – focused solely on securing a deal – would weaken Yahoo’s bargaining position. Better, then, to elect a few of Mr Icahn’s team at the shareholders’ meeting in August. This would avoid triggering the severance plan but would entrench a few cheerleaders for a deal with Microsoft. For Yahoo’s board, deliverance from Mr Icahn may be short-lived.

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