Is Yahoo Run by a Bunch of Yahoos?
ADOTAS – What fresh hell is this? Yahoo has unleashed a tsunami of negative publicity as reports emerge that the Internet pioneer rejected what would have likely been extremely lucrative deals with both Microsoft and Google.
First things first: Microsoft offered to buy Yahoo for $40 a share (Jerry Yang’s reported sweet spot) in January of 2007 and was rebuffed. Yahoo’s CEO at the time, Terry Semel, was hoping for a commercial partnership, but progress was slow, leading to the unsolicited low-ball bid of $31 a share from Microsoft, according to a complaint, filed in the Delaware Court of Chancery, now posted online here.
But that’s not all: in the unsealed document, shareholders allege that when Semel left Yahoo in June of 2007 in the midst of a shareholder revolt, Yang instituted various roadblocks to stymie Microsoft, most notably a costly employee-severance plan for the 13,800 plus Yahoo workers that Microsoft would have to pay if they snapped the Internet company up and got rid of their suite of employees. (The workers would be given between four months and two years severance, for a total of up to $2.4 billion in benefits).
The lead counsel, Bernstein Litowitz Berger & Grossmann LLP, filed the suit on behalf of two Detroit retirement funds and “all other similarly situated public shareholders (the ‘Class’) of Yahoo.”
The Class Action Complaint alleges (among other things) that Yahoo and its board:
“[A]cted to thwart a non-coercive takeover bid by Microsoft, which would provide a 62% premium over Yahoo’s pre-offer share price, and have instead approved improper defensive measures and pursued third party deals that would be destructive to shareholder value.”
“[R]ebuffed [Microsoft] supposedly so Yahoo’s management could implement existing strategic plans. None of those initiatives improved Yahoo’s performance. On February 1, 2008, over a year after its initial approach, Microsoft returned, offering to acquire Yahoo for $31 per share, representing a 62% premium above the $19.18 closing price of its stock on January 31, 2008.”
“Rather than consider Microsoft’s offer in good faith, Yahoo’s board took various steps to defend against Microsoft, destroying or threatening to destroy shareholder value in the process. As a result of the Yahoo Board’s improper actions, on May 3, 2008, Microsoft withdrew its bid, causing Yahoo’s stock to plummet when markets reopened.”
Onto Google: Yahoo execs reportedly rejected a search-advertising deal with Google because of antitrust concerns on the eve of Microsoft’s unsolicited takeover bid. No explanation has emerged for Yahoo’s about-face on April 9, when it penned a deal with Google to test out just such a partnership.
As of about 12:40 p.m., Yahoo was trading at $26.26, down about 0.53%; Google was trading at $578.12, up about 0.54% and Microsoft was trading at $27.81, up about 0.04%.
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