Yahoo curbs severance pay in event of a takeover
SAN FRANCISCO -- In a move that could make it easier to negotiate a sale, Yahoo Inc. has overhauled a severance program that could have saddled potential buyers with a huge bill after a takeover.
The concessions disclosed Wednesday in a regulatory filing were made to settle a shareholder lawsuit alleging Yahoo conceived the severance plan in February to thwart an unsolicited buyout bid by Microsoft Corp.
The plan promised generous cash and stock benefits to virtually all of Yahoo's nearly 14,000 employees if they were fired, took a pay cut or resigned after being involuntarily reassigned to another job within two years of a takeover.
The sweeping coverage would have cost Microsoft an additional $462 million to $2.1 billion had the software maker been able to buy Yahoo at its initial offer of $44.6 billion, or $31 per share, according to internal Yahoo documents turned over during the shareholder case in Delaware court.
Yahoo agreed to revisions that will make it more difficult for employees to qualify for severance pay after a takeover. The changes also limit the eligibility period to the first year following a sale and allows the board to scrap the plan entirely — an option that wasn't available under the original terms.
The revisions also specify the severance packages won't be available if Yahoo decides to sell its search operations to Microsoft. That's a deal several major shareholders, including board member Carl Icahn, are trying to make happen.
Microsoft has repeatedly said it no longer wants to buy Yahoo in its entirety, but remains interested in a deal involving Yahoo's search engine.
With Yahoo's stock hovering near its lowest level in five years, the Sunnyvale-based company's board has been under intensifying pressure to lure Microsoft back to the bargaining table.
But Yahoo spokesman Brad Williams said the revision to the severance program weren't made with a sale in mind. "We did this to avoid potentially costly and distracting litigation," he said.
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