Microsoft’s unsolicited bid to acquire Yahoo is heading down an unpleasant path. This week, Microsoft is reportedly undertaking a proxy fight, sending letters directly to shareholders to garner enough support to oust Yahoo’s board of directors and replace them with a merger-friendly board. A proxy fight is estimated to cost Microsoft up to $30 billion, but was likely seen as a cheaper alternative for Microsoft than raising its bid price.
“We sent them a letter and said we think that’s a fair offer,” Bill Gates, Microsoft’s chairman, told The AP on Monday. “There’s nothing that’s gone on other than us stating that we think it’s a fair offer. They should take a hard look at it.”
At the same time, Yahoo’s current board has approved retention packages and enhanced severance benefits for all Yahoo employees. The aim is to both keep Yahoos around during the threat of a takeover, as well as to give them a more lucrative way out if the Microsoft acquisition is fulfilled.
As outlined in a Form 8-K filing with the Securities and Exchange Commission, employees would get an enhanced severance package if they lost their job or left for “good reason” within two years of a change of control. An employee exercising the package would get a continuation of base salary and health insurance for 4 to 24 months, depending on job level. Employees will also benefit from accelerated vesting of all stock options, restricted stock units and any other equity-based awards previously granted.