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 »