Microsoft ‘planning coup at Yahoo!’

Feb 5 2008 by Iain Laing, The Journal

MICROSOFT is said to be preparing a boardroom coup at Yahoo! if the internet search engine fails to accept its £22.4bn bid.

The software giant is believed to be planning to use rights as a Yahoo! shareholder to oust executives and achieve a swift takeover of the firm.

Microsoft unveiled its deal on Friday, saying the two companies combined would be better placed to challenge search engine favourite Google.

But it also hinted at a hostile bid by reserving the right “to pursue all necessary steps” to win over the firm’s shareholders if the deal was opposed.

As a shareholder of Yahoo!, Microsoft would be able to nominate executives to be voted on by all shareholders. Microsoft was unavailable for comment on the strategy.

The news comes after comments from Google’s top legal officer that Microsoft’s bid to buy rival Yahoo! was “troubling” and could threaten the openness of the internet.

David Drummond, Google’s chief legal officer, said: “Microsoft’s hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It’s about preserving the underlying principles of the internet: openness and innovation.”

Microsoft’s proposal follows predictions that the online advertising market will double in size to around £40.2bn by 2010.

The firm said its £15.59 a share offer for Yahoo! represented a 62% premium on the search engine’s closing share price on Thursday last week. It also aims to make £503m in cost savings every year through the deal.

Yahoo! has so far just said its board will carefully examine Microsoft’s bid – a process that “can take quite a bit of time”, according to a message posted on the California-based company’s website. The review “will include evaluating all of the company’s strategic alternatives, including maintaining Yahoo! as an independent company,” Yahoo! added.