Now that Microsoft has made another pass at Yahoo, and Yahoo has rebuffed Redmond's advances, what's next? Here's an outline of the likely sequence of events.
Let's assume that Yahoo fails to agree on a deal with Microsoft before the three-week deadline Microsoft set in its April 5 letter, which would be April 26. At that point Microsoft, presumably, will launch a proxy battle to take over Yahoo's board.
First, Yahoo has to send out its proxy materials to shareholders, which includes information about its board nominees. (Yahoo recently extended the deadline for nominating board members to 10 days after it announces its annual meeting, and the company still hasn't scheduled that yet.) Given that Yahoo's shareholder meeting was in June of last year, that could imply that the deadline to nominate candidates for the board would fall in May.
After Yahoo sends out its proxy materials, Microsoft sends out its own set of proxies to shareholders. Microsoft would solicit votes for its slate of handpicked board nominees, assuming that if it can take over Yahoo's board, it can steer the company's strategic direction, which would likely increase the chances of a merger.
"It's not a foregone conclusion that the Microsoft-Yahoo deal will happen immediately [if Microsoft takes over Yahoo's board]," says Barry Genkin, an attorney and partner at Blank Rome. "The moment someone becomes a director [on Yahoo's board], his or her fiduciary responsibility is to determine what's in the best interest of Yahoo shareholders. The board has to look at all ways to enhance shareholder value, and it has to carefully consider the price of a Microsoft deal."
Genkin says a proxy battle can cost millions of dollars, but it's a cheap way to gain control of a company, versus outright buying a corporation through a tender offer, which could potentially cost billions of dollars. (In a tender offer, an acquiring company buys outstanding shares of a company directly from shareholders.)
Historically, proxy battles have been somewhat rare in the tech sector, but Genkin says they are likely to become more common.
"We're already seeing it," he says. "We're seeing it with Cnet right now. [Proxy battles] used to be rare, because tech stocks traded at such high multiples. But since the sector's been hammered, you're seeing a lot of hedge funds with big positions in a company, launching proxy contests to effect change. I think you're going to see a host of contests in the coming year."
Photo: Flickr/Leo Reynolds
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