Yahoo Seeks Way to Block Microsoft

Microsoft, whose offer for Yahoo is now worth $41.2 billion, was preparing to escalate its takeover fight by starting a proxy contest next week. But in an effort to delay that move, Yahoo said Wednesday that it was extending the deadline for nominating directors until 10 days after the announcement of a date for its annual meeting.

The maneuver comes as Yahoo has stepped up merger and joint venture talks with AOL, a unit of Time Warner, these people said.
Microsoft had been preparing to nominate a slate of directors to the board of Yahoo by next

Thursday, the deadline for mounting a proxy contest. In its announcement on Wednesday, Yahoo said it was seeking more time to consider alternatives.

“As the company has not yet announced the date of this year’s annual meeting, the amendment will give stockholders who want to nominate one or more directors, including Microsoft Corporation, more time to do so,” the company said. “The amendment does not preclude any party from nominating one or more directors at any time prior to the new deadline.”
It gave no indication of when the annual meeting might be held.

Under the laws of Delaware, where Yahoo is incorporated, a public company cannot go more than 13 months without holding an annual meeting. Yahoo held its annual meeting last year on June 12.

The delay could leave room for Microsoft to reach a negotiated, friendly deal with Yahoo, which would be made much more difficult if Microsoft decided it needed to pursue the proxy contest. On the other hand, Yahoo’s continued maneuvering might just harden Microsoft’s resolve.
Spokesmen for Yahoo and Microsoft declined to comment.
Meanwhile, Yahoo, which has been canvassing for other possible suitors and has held talks with the News Corporation and Google, appears to be focused on a possible transaction with AOL, people involved in the talks said.

It is unclear what shape a deal could take. AOL is far too small to buy Yahoo, but a joint venture or merger of the two properties — which would combine AOL’s strong position in the display advertising market and Yahoo’s display and search advertising business — could be seen as an alternative to a sale to Microsoft.
A deal between Yahoo and AOL is being supported by Google, which has a 5 percent stake in AOL, these people said.

Most analysts believe it is unlikely that a combination with AOL or the News Corporation, or a business deal with Google, would persuade Yahoo shareholders they would fare better than by taking Microsoft’s offer. The cash-and-stock bid was initially $44.6 billion but has fallen along with Microsoft’s stock.

Last week, AOL’s chief executive, Randy Falco, appeared to dismiss talk of a deal with Yahoo and seemed to be reveling in the drama. “I hope they beat each other’s brains out over search and leave the display market to us,” Mr. Falco said at the Interactive Advertising Bureau’s annual conference. “I think it’s a mistake. But I think Napoleon said never interrupt your enemy when they’re in the middle of making a mistake.”
Miguel Helft contributed reporting.