Software giant is 'giving both the carrot and the stick,' analyst says
MSNBC News Services
SEATTLE - Microsoft Corp. will authorize a proxy battle for Yahoo Inc. this week to convince the Web company's shareholders to agree on a takeover deal that the Yahoo board so far has rejected, the New York Times' DealBook blog said on Tuesday.
Quoting people briefed on the matter, the Times Web site said that Microsoft, which has been expected to raise its cash-and-stock bid originally worth $44.6 billion, would seek to nominate a slate of directors by March 13, if Yahoo's board did not enter talks.
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A Microsoft spokesman said the company had always maintained it reserves the right to exercise all options but declined to comment specifically on the DealBook report.
A person familiar with the matter told Reuters a proxy fight would cost about $20 million to $30 million but was not aware of Microsoft making the decision to pursue the fight.
"Microsoft is doing the smart thing. It's giving both the carrot and the stick," said Morningstar analyst Toan Tran. "The carrot was the big premium on Yahoo stock and now the stick is the threat of a proxy fight."
Proxy fights waged by corporations to facilitate a hostile acquisition are rare and represent less than 5 percent of all proxy fights since 2001, according to data from research firm FactSet SharkWatch.
Microsoft is not privately haggling with Yahoo over the software maker’s rejected $31-per-share buyout offer for the slumping Internet pioneer, Bill Gates said in an interview.
“We sent them a letter and said we think that’s a fair offer. There’s nothing that’s gone on other than us stating that we think it’s a fair offer,” the Microsoft chairman said Monday. “They should take a hard look at it.”
The two companies are at a stand-off in Microsoft's unsolicited bid to acquire Yahoo. Microsoft has offered to buy Yahoo for $31 a share in cash and stock, a bid which Yahoo's board rejected, saying it undervalued the company.
Microsoft countered by saying that its offer was "full and fair," but did not say what it planned to do next.
The deal is now worth $41.9 billion due to the decline of value in Microsoft's stock.
The fees for paying lawyers and solicitation firms to wage a proxy fight are a fraction of what it would cost Microsoft to raise its offer. For every dollar the offer is increased, it would cost Microsoft an additional $1.4 billion.
If Microsoft decides to launch a proxy fight, it would nominate a slate of directors to take control of Yahoo's board and support the company's proposal. The nominees would be voted on at Yahoo's annual shareholder meeting in June.
A Yahoo-Microsoft proxy fight would be largest corporate proxy fight in the eight years FactSet SharkWatch has been tracking statistics on this, it said.
Yahoo is adopting severance plans to take effect if the Web portal is taken over by Microsoft Corp.
The plans cover all of Yahoo’s full-time employees, including its top executives, for two years after a change in control of the company.
Workers who lose their job without cause — or quit for good reason as Yahoo defines it — would continue to receive their salary and medical benefits for four to 24 months, plus reimbursement for “outplacement services” for two years.
The departing employees’ stock options would also vest faster than scheduled.
Reuters and Associated Press contributed to this report.
Microsoft to authorize Yahoo proxy battle - U.S. business - MSNBC.com
