Yahoo! shareholders sue CEO, board over rejection of Microsoft merger offer

By Lisa Kerner

Charlotte, N.C., May 6 - Yahoo!, Inc. shareholders will amend their pending consolidated class action lawsuit against the company's chief executive officer Jerry Yang and the other members of the Yahoo! board of directors for "thwarting" a merger proposal by Microsoft Corp.

In the amended complaint, the plaintiffs will seek recovery of damages for the "massive loss in shareholder value caused by Yang and Yahoo!'s board."

The lawsuit was filed by two public pension funds, the Police & Fire Retirement System of the City of Detroit and the General Retirement System of the City of Detroit (together, "the Detroit Funds"), according to a statement released by the Detroit Funds' court-appointed co-lead counsel Bernstein Litowitz Berger & Grossmann LLP and Bouchard Margules & Friedlander, PA.

It was previously reported that Microsoft withdrew its proposal to acquire Yahoo! after Yahoo! failed to move toward accepting Microsoft's increased offer.

In April, Yahoo! announced a limited test of Google Inc.'s AdSense for Search service.

"If Jerry Yang wants to understand why Yahoo! shareholders are so unhappy, he should go to his new favorite search engine - Google - and look up the phrase 'breach of fiduciary duty,'" Bernstein Litowitz partner Mark Lebovitch said in the news release.

"Yang's willingness to put the heart of Yahoo!'s search function in Google's hands to preclude a Microsoft bid representing a 70%-plus premium demonstrates that Yang was never negotiating in good faith," Lebovitch added.

The lawsuit is pending in the Court of Chancery for the State of Delaware before Chancellor William B. Chandler III.

Microsoft was willing to raise its bid to $33 per share, Microsoft CEO Steve Ballmer said in a May 5 letter to Yang.

According to Ballmer, Yahoo! wanted at least another $4 per share, or another $5 billion.

The Redwood, Wash., software company originally offered to acquire Yahoo! for $31 per share, or some $44.6 billion, a prior news release said.

Ballmer, in his letter to Yang, noted that a Yahoo!/Google arrangement would make Yahoo! less attractive to Microsoft.

Yahoo! provides internet services. The company is based in Sunnyvale, Calif.

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