Two public pension funds from the city of Detroit plan to expand a complaint against Yahoo CEO Jerry Yang and other members of Yahoo's board of directors, saying they failed to act in the best interest of shareholders in rejecting Microsoft's bid to buy Yahoo.
Their original lawsuits were filed separately on March 5 over what the pension funds deemed an unreasonable attempt by Yahoo's management team to thwart an acquisition by Microsoft that would have paid shareholders a 62 percent premium over Yahoo's pre-bid stock price. The lawsuits have been combined into a general class-action lawsuit, and lawyers representing the pension funds say they will seek damages for the loss of shareholder value allegedly caused by Yahoo management over the failure of the bid this weekend.
The actions taken by Yahoo's CEO this past weekend confirm that the company's board of directors pursued all manner of value-destructive third-party deals to fight off Microsoft's bid, lawyers representing the Police & Fire Retirement System of the City of Detroit and the General Retirement System of the City of Detroit said in a statement Monday.
Those actions constitute a breach of fiduciary duty, they allege.
Microsoft announced its original $44.6 billion acquisition bid on Feb. 1, sending Yahoo shares up as high as $29.83 each on the day, a huge increase from $19.18 before the offer. Yahoo first rejected the bid on Feb. 11, but did enter talks with Microsoft. In the end, the deal fell apart despite a sweetened offer of $33 per share from Microsoft.
Yahoo shares fell 15 percent on Monday to $24.37, after dropping to as low as $22.97 earlier in the day.
Yahoo appears to have sought several alternatives to the Microsoft deal, including reportedly trying a tie-up with Google on its search advertising business. Lawyers for the pension funds, Bernstein Litowitz Berger & Grossman LLP, say attempts at such deals show that Yang never negotiated with Microsoft in good faith.
Yahoo did a two-week test run of Google ads in April, but hasn't disclosed the results.