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Appeared on: Wednesday, February 20, 2008
This is War: Microsoft Readies Yahoo Proxy Battle

Microsoft doesn?t plan to raise the price of its $44.6 billion takeover bid for Yahoo, but it is about to make it a lot harder, according to reports today.

Microsoft has authorized a proxy battle for Yahoo this week, in a bid to lure the Web company?s shareholders into Microsoft?s camp. And if Yahoo doesn?t enter talks with Microsoft, the company will seek to nominate a new batch of directors to Yahoo?s board by March 13 ? and oust the old board in the process, The New York Times reports. Because Yahoo doesn?t have a staggered board, it is vulnerable in a proxy battle. All of the Internet company?s directors are up for nomination this year, The Times notes. And in a contested election, directors are elected by a plurality of votes cast.

The battle is expected to cost Microsoft between $20 million and $30 million, a much cheaper alternative to raising its bid. Upping the $31-per-share offer would cost Microsoft an additional $1.4 billion for every dollar added. Yahoo rejected the initial overture as "not in the best interests" of stockholders, saying the company is "uniquely positioned" to grow from $45 billion in 2007 to $75 billion in 2010.

A Yahoo-Microsoft proxy fight would be the largest corporate proxy fight in the eight years.

In the meantime, Yahoo adopted new severance packages that protect employees in the event of a Microsoft takeover.

Microsoft also may simultaneously circumvent Sunnyvale, Calif.-based Yahoo's management and ask shareholders to sell their stock to Microsoft directly.

In an interview with The Associated Press Monday, Microsoft Chairman Bill Gates said the software maker was not talking to Yahoo about raising its bid.

Analysts, however, still believe there's wiggle room.


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