Here Come the Shareholder Lawsuits Against Yahoo

The inevitable shareholder lawsuits have started to be filed against Yahoo for not accepting Microsoft’s bid. Yesterday, the Wayne County Employee’s Retirement System of Michigan, was the first to file suit. The retirement fund owns 13,600 shares. You can expect more shareholders to pile on board, especially if this thing drags out.In fact, that is not the only shareholder suit Yahoo is facing. On February 1, the day Microsoft made its recent offer, another shareholder lawsuit was filed against Yahoo in California for failing to accept Microsoft’s bid from the year before. They might want to amend that lawsuit to include Yahoo’s most recent rejection as well.

The more that Yahoo fights the merger, the more shareholder lawsuits will pop up. The reports in the media typically note how this is increasing the pressure on Yahoo. Nothing against Wayne County, but 13,600 shares is a tiny stake for an institutional investor. If bigger investors started suing, then the pressure would be noticeable. But big investors don’t sue, they vote their shares.

It’s Official: Yahoo Rejects Microsoft Bid

Over to you, Microsoft.

Yahoo, confirming reports over the weekend that it would reject Microsoft’s unsolicited takeover bid, said early Monday that its board had found the $44.6 billion offer was “not in the best interest of Yahoo! and our stockholders.” In a short news release, Yahoo said the $31-per-share proposal “substantially undervalues” the Internet company, its brand and its investments. The formal rejection sets the stage for Microsoft to take its next step, and there are plenty of options. It could raise its offer, canvass Yahoo’s major shareholders for support or even wage a battle to replace Yahoo’s board.

Below, the full text of Yahoo’s bid rejection:

“Yahoo! Inc. (Nasdaq: YHOO), a leading global Internet company, today said the Yahoo! Board of Directors has carefully reviewed Microsoft’s unsolicited proposal with Yahoo!’s management team and financial and legal advisors and has unanimously concluded that the proposal is not in the best interests of Yahoo! and our stockholders.

After careful evaluation, the Board believes that Microsoft’s proposal substantially undervalues Yahoo! including our global brand, large worldwide audience, significant recent investments in advertising platforms and future growth prospects, free cash flow and earnings potential, as well as our substantial unconsolidated investments. The Board of Directors is continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders.

Goldman, Sachs & Co., Lehman Brothers and Moelis & Company are acting as financial advisors to Yahoo!. Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor to Yahoo!, and Munger Tolles & Olson LLP is acting as counsel to the outside directors of Yahoo!.”

Go to Press Release via the Securities and Exchange Commission »

Yahoo to Reject Microsoft Bid

Yahoo’s board is planning to reject Microsoft’s $44.6 billion offer, arguing that it “massively undervalues” the company, according to a Wall Street Journal report. The board reportedly won’t consider an offer below $40 per share, which, as we understand it, was a number that was tossed out by Microsoft last year. The board also argues that the current offer doesn’t adequately reflect the risk that the deal could be overturned by regulators.

The board is reportedly planning on sending a letter on Monday, a little more than a week after Microsoft submitted an unsolicited bid of $31 per share, or $44.6 billion, for Yahoo.

Although the company has repeatedly asked for time to review its options, most analysts believe it will only be a matter of time — and money — before Yahoo succumbs to Microsoft’s offer.

Given the size of Microsoft’s bid, the likelihood of a higher offer from another bidder is minuscule and the list of potential suitors is very short. Still, Yahoo is rumored to be toying with the idea reorganizing the company and outsourcing its search-based advertising to Google in an effort to bolster revenue and remain a standalone company. Some industry watchers have also speculated that Yahoo could be trying to arrange an alternative deal with AOL.

Yahoo’s intentions could become clearer in another week (or by mid-February), when the company is expected to cut about 1,000 positions. Hypothetically, if it proceeds with the layoffs, that could indicate its seriousness at remaining independent, according to experts.