Yahoo Inc. is seeking to conceal large portions of a shareholder lawsuit alleging the Internet company's board improperly thwarted Microsoft Corp.'s $47.5 billion takeover offer, raising shareholder questions over the motives for the secrecy.
In a letter sent Friday to the judge overseeing the case in Delaware, a lawyer for the shareholders argued Yahoo is trying "to whitewash embarrassing documents" because the company thinks the information will damage the board's efforts to repel a challenge by activist investor Carl Icahn.
Angered by the board's handling of Microsoft bid, Icahn has nominated an alternate slate of candidates to oppose Yahoo's 10 current directors _ including Chief Executive Jerry Yang _ at the Sunnyvale-based company's July 3 annual meeting.
Yahoo is trying "to sanitize the public record and maintain a cloak of secrecy regarding unflattering evidence of breach of fiduciary duty," shareholder attorney Joel Friedlander wrote in a letter to Chancellor William B. Chandler III.
The redacted documents include information about an employee severance plan that Yahoo adopted shortly after Microsoft made its initial bid Jan. 31 and notes about a conversation between Yang and Microsoft CEO Steve Ballmer, Friedlander wrote.
Yahoo had no immediate comment Friday. Generally, companies often seek to keep parts of publicly available lawsuits under seal for competitive reasons.
A hearing on the request to unseal the disputed material has been scheduled at 10 a.m. Tuesday in Chandler's court, said Mark Lebovitch, another lawyer representing the shareholders. He declined further comment.
The concealed information was gathered during the discovery phase of the nearly three-month-old suit. If they're made public, the documents could become fodder in Icahn's campaign to remove Yahoo's board.
The information would be particularly damaging to the board if it suggest the directors deliberately took steps to make Yahoo more expensive for Microsoft.
Friedlander's letter says the redacted documents include estimates about how much Yahoo's employee severance plans would cost Microsoft in a takeover _ information that could be of particular interest to shareholders trying to figure out if the current board acted in their best interests.
Yahoo had previously disclosed the plans would give its 13,800 employees anywhere from four month to two years pay. Every $1.4 billion in severance cost theoretically would translate into about $1 per share less that Microsoft would have available to offer Yahoo shareholders.
Ballmer orally offered $33 per share, or $47.5 billion, but then withdrew the bid when Yang held out for $37 per share. Legg Mason money manager Bill Miller, whose fund is Yahoo's second largest shareholder, has publicly said he would have happily supported a Microsoft offer of $34 per share.
Friedlander's letter also indicated the redacted documents include comments that Yahoo's top executives made about the severance plans.
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