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Pension Funds Sue Yahoo for Stalling Microsoft Takeover

Two U.S. pension funds have now sued Yahoo over their efforts to thwart off a Microsoft takeover, and instead entertain less profitable alternatives.  The lawsuit was filed on February 21, 2008 by two Detroit retirement systems that claim Yahoo is “pursing all manner of value-destructive third-party deals” while resisting Microsoft’s $44.6 billion offer.

The lawsuit also makes reference to an alternative deal with News Corp. to combine online services that is “specifically structured to avoid any shareholder vote and to thwart the desire of Yahoo’s shareholders to sell their shares for the maximum available value.”

Yahoo formally rejected Microsoft’s unsolicited bid of $31 per share on February 11, contending that such a bid “substantially undervalues” the company.  With this latest lawsuit, there are now at least three filed against Yahoo following the board’s vote on Feb. 11.

Yahoo has been actively exploring potential alliances with Google, AOL (Time-Warner), and MySpace (News Corp.) since rejecting Microsoft’s bid. As evidenced by the lawsuits, some shareholders are not pleased about the board’s decision.

In other Microsoft – Yahoo related news, Microsoft sent out an e-mail on Friday which outlines their vision of how they expect to take over Yahoo and merge the two companies’ cultures and resources:

“We look forward to a constructive dialogue with Yahoo’s board, management, shareholders, and employees on the value of this combination and its strategic and financial merits.

“Once Yahoo and Microsoft agree on a transaction, we can begin the integration planning process in parallel with the regulatory review,” said Microsoft platform and services division president Kevin Johnson.

According to Johnson, if Yahoo agrees, the deal would likely close in the second half of 2008.

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