After watching its stock price fall continually from its post internet bubble high of $43 set in Jan. 2006 and seeing Google (GOOG) surpass it in virtually every online metric, Yahoo’s (YHOO) senior management has decided to make sure if Microsoft (MSFT) does buy them, they are richly rewarded. Too bad for shareholders that actions like this just might cost them money..
A new “employee retention and severance” program for SENIOR EXECUTIVES looks like this:
* Up to two years of full pay and benefits following departure,
* $3,000-$15,000 of “outplacement services” (help finding a new job),
* Accelerated stock and option vesting, and
* The ability to leave the company–and trigger the severance payments–for any “good reason”
Now what is important is that this plan goes into effect “in the event of a change of control” of the company. What this all amounts to is a near $1 billion increase in the cost of any acquisition of Yahoo. Now, while in this case the cost may be born by Microsoft, it will probably come at the expense of a reduce offer price, lower bonuses to retain current non-senior executives and, for these shareholders who may elect to take shares for the transaction, a prolonged “synergy” period as the excess costs are absorbed.
Essentially Yang realized that the offer from Microsoft was a great one and that he would have a hard time getting shareholders to say “no”. He also recognized that Microsoft was the only bidder despite his attempts to interest Google and News Corp. (NWS) and that a higher offer was not going to be forthcoming. Without a higher per share offer coming, this loathsome action was the next best choice to wring a few more buck for him and his cronies out of the deal. Slimy…
All this so Yang & Co. can cash out at a higher price than the rest of the “little folks” (this would include his employees and shareholders)? With a mindset like this, any wonder the stock has been a dud this decade?
The worst case scenario would be for Microsoft to tell them to take a hike and let the socks price, current at $28 ($3 below the offer price) plummet back down to the $20 level it was at prior to Microsoft’s bid. Once there, it can comfortable resume its downward march to $10. All this due to greed….
I thought we were trying to get passed management enriching themselves at the expense of employees and shareholders?
Disclosure (“none” means no position): None
