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eBay Rejects Icahn Nominees as Fight Goes to Shareholders

Updated from 9:30 a.m. to reflect added context on eBay share price and closing stock quote.

NEW YORK (TheStreet) -- eBay (EBAY) has rejected two directors nominated by billionaire activist investor Carl Icahn to the company's board of directors and called the nominees "unqualified." The e-Commerce giant's decision came in a preliminary annual proxy filing to shareholders, which asked that shareholders re-elect four board members including CEO John J. Donahoe.

eBay's filing, while unsurprising, means that a scorched-earth campaign being run by Icahn to undermine the company's management and board may now go directly to shareholders.

eBay's Russian Front Underscores PayPal Growth Strategy

"The Corporate Governance and Nominating Committee gave serious consideration to the two employees of Carl Icahn that he nominated to the Board. After careful review, the Board concluded that they are not qualified candidates based on the criteria that have consistently been applied by the Committee, including in particular that neither nominee has relevant experience or expertise," eBay independent director and corporate governance and nominating committee chairman Richard T. Schlosberg said in a statement.

"In addition, neither nominee would comply with the Board's governance guidelines on overboarding -- each is on four public company boards and Mr. Ninavaggi is co-CEO of Federal Mogul," Schlosberg said.

The company asked that shareholders re-elect Fred D. Anderson, co-founder of VC firm Elevation Partners, Edward W. Barnholt, the former CEO of Agilent Technologies  (A), Scott D. Cook, co-founder and chairman of Intuit  (INTU), and John J. Donahue, eBay's current CEO.

"Fred Anderson, Ned Barnholt, Scott Cook and John Donahoe are proven leaders who have been enormously valuable directors. They demonstrate the caliber of leadership, business experience, insight and expertise that our company needs and that I believe our stockholders expect on our Board," Pierre M. Omidyar, eBay founder and chairman, said in a statement.

$4 Billion in Lost Value

On Monday, Icahn released a new screed against eBay on his Web site, Shareholderssquaretable, and said he'd uncovered evidence that CEO Donahoe's "inexcusable incompetence cost eBay stockholders over $4 billion."

Icahn's honed in again on eBay's sale of Skype to a private equity consortium led by Silver Lake Partners and that counted board member Mark Andreessen's VC firm Andreessen Horowitz as a participant. eBay sold 70% of Skype to the PE/VC consortium for $1.9 billion, while retaining a 30% interest in the asset. Eighteen months later, Skype was sold to Microsoft (MSFT) for $8.5 billion.

Icahn said on Monday he had uncovered a letter that one of Skype's founders told the buyout group a workaround technology could solve a licensing dispute that caused Microsoft to initially walk away from eBay's sale efforts.

The letter is just the latest in a dizzying back and forth between eBay and Icahn over the credibility of the company's management. Icahn wants to undermine eBay's top brass so he can either have board appointments or the company decide to spin off its profitable and fast-growing PayPal division.

"Yet in pursuit of his own profit motives, Carl Icahn has made another unsubstantiated attack on John," eBay said in a statement in response to Icahn's letter. "Just like his previous ones, this attack is false and misleading and has already been utterly discredited by the facts."

"In the five years since John's first analyst day, eBay's stock price has increased more than 460%, significantly outpacing both the Nasdaq and the overall market. John's track record of success at eBay, driving the company's turnaround and growth, is well documented," eBay went on to say.

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