Yahoo Moves to Block Proxy Battle in Microsoft Takeover Bid

Published: March 12, 2008

by Alex Woodie

The corporate chess match between Yahoo and Microsoft continued last week when Yahoo delayed indefinitely the deadline for nominating directors for election to its board. The move will give Yahoo more time to prepare for an upcoming proxy battle Microsoft is expected to wage to insert a board more amenable to accepting Microsoft's acquisition offer.

The deadline for nominating directors to Yahoo's board previously had been March 14, just two days away. The date was significant for both Microsoft and Yahoo because it would have marked the beginning of the next step in Microsoft's unsolicited, $40 billion bid to take over Yahoo--namely, Microsoft's attempt to stage a proxy battle, and stack the board with directors who would approve the acquisition.

Considering the numerous shareholder lawsuits against Yahoo, the odds appeared to be fairly good that Microsoft would have at least some success in a proxy battle. And the fact that all 12 of Yahoo's board positions were up for election--a relative rarity in the corporate world--made the stakes even higher for Yahoo.

But with Yahoo's decision to postpone the deadline for nominating candidates to the board, the prospect of all-out proxy warfare for the Internet's number two search engine will have to be put on hold.

Yahoo says the new deadline will be 10 days following the public announcement of the date for Yahoo's 2008 annual meeting of stockholders. But here's the catch: Yahoo hasn't yet set the date for its annual meeting, which gives Yahoo's management as much time as it needs to talk to the mutual funds and retirement funds that hold big chunks of Yahoo stock, and convince them that they have a plan to grow the company and shouldn't take the $40 billion and run.

Obviously, Yahoo can't hold out forever. If it doesn't hold an annual meeting to vote in a new board, it would be in violation of numerous securities laws. Last year, it announced its annual stockholder meeting on June 5 and the meeting was held a week later in Santa Clara, California.

Yahoo also reiterated its commitment to fight Microsoft's unsolicited February 1 offer. "Yahoo's board of directors remains committed to pursuing initiatives that maximize value for Yahoo's stockholders. To the extent that the extension of the nomination deadline has the effect of postponing the nomination of one or more directors by any party, it will allow Yahoo's board to continue to explore all of its strategic alternatives for maximizing value for stockholders without the distraction of a proxy contest."

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