Yahoo Allows Time to Nominate Board Members

Yahoo has lifted next week's deadline for nominating directors to its board, an attempt to discourage Microsoft from launching a proxy fight to replace the current board with members willing to approve its Yahoo acquisition bid.

The decision to move the deadline, announced Wednesday, is the latest maneuver by Yahoo to attempt to buy itself more time to seek alternatives to Microsoft's unsolicited acquisition bid.

If Microsoft does plan to nominate its own slate of board candidates, it would have had to do it no later than March 14, the original deadline. Now, Microsoft has more time to ponder such a move.

Also on Wednesday, The New York Times and The Wall Street Journal reported that Yahoo has stepped up negotiations with Time Warner for a possible tie-up with AOL.

Quoting anonymous sources, The Journal reported that the most likely scenario would be for AOL to be folded into Yahoo. The Times, also quoting anonymous sources, said a joint venture or merger of equals are possibilities.

To extend the nomination deadline, Yahoo amended its bylaws to state that now directors can be nominated up to 10 days after Yahoo announces the date for its 2008 annual stockholder meeting.

"As the company has not yet announced the date of this year's annual meeting, the amendment will give stockholders who want to nominate one or more directors, including Microsoft Corporation, more time to do so. The amendment does not preclude any party from nominating one or more directors at any time prior to the new deadline," Yahoo said in a statement Wednesday.

In an e-mail sent to Yahoo employees on Wednesday, CEO and co-founder Jerry Yang and board chairman Roy Bostock explained that the decision seeks to discourage Microsoft from launching a proxy fight as early as next week.

"In light of the current circumstances, this change removes an imminent deadline. Microsoft, of course, could still choose to name directors, but our objective here is to enable our board to continue to explore all of its strategic alternatives for maximizing value for stockholders without the distraction of a proxy contest," reads the e-mail, which was also filed with the U.S. Securities and Exchange Commission.

Yang and Bostock also acknowledge that Yahoo's board and top managers are exploring alternatives "to create stockholder value" and that they are making progress "clarifying the many options available to us."

Apparently, Yang began looking for and considering alternatives to a Microsoft acquisition soon after Microsoft announced its US$44.6 billion bid on Feb. 1, a bid whose value now stands at around $41 billion due to a drop in Microsoft's stock price.

In addition to the AOL talks, there have been reports -- all attributed to anonymous sources in various media outlets -- that Yang has talked to Google, Disney and News Corp. to explore deals that would allow him to reject Microsoft's offer.

The problem for Yang is that an alternative deal would have to at least match the shareholder value of Microsoft's offer. Otherwise, Yahoo would make itself liable to shareholder lawsuits that alleged the board had failed to perform its fiduciary duty.

On Feb. 1, Microsoft offered to pay $31 per share for half of Yahoo's outstanding shares in cash -- about $22.3 billion -- and 0.9509 of a Microsoft share for the other half. Microsoft's half-cash/half-stock offer to Yahoo was valued at about $44.6 billion at the time it was made; Yahoo's share price was $19.18 at the time, while Microsoft's was $32.60.

At the time, the offer represented a 62 percent premium based on the price of Yahoo's stock, but that premium has been erased as Yahoo's stock has risen and Microsoft's fallen. In mid-morning trading on Wednesday, Yahoo's stock price was $28.58 and Microsoft's $28.28.

After Yahoo rejected Microsoft's offer on Feb. 11, saying it undervalues the company, Microsoft indicated it would be willing to pursue any options to acquire Yahoo, leaving the door open to a hostile takeover through a proxy fight.

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