In a move that could make it easier to negotiate a sale, Yahoo Inc has overhauled a severance program that could have left potential buyers with a huge bill after a takeover.
The concessions disclosed on Wednesday in a regulatory filing were made to settle a shareholder lawsuit alleging Yahoo conceived the severance plan in February to thwart an unsolicited buyout bid by Microsoft Corp.
The plan promised generous cash and stock benefits to virtually all of Yahoo’s nearly 14,000 employees if they were fired, took a pay cut or resigned after being involuntarily reassigned to another job within two years of a takeover.
The sweeping coverage would have cost Microsoft an additional US$462 million to $2.1 billion had the software maker been able to buy Yahoo at its initial offer of US$44.6 billion, or US$31 per share, internal Yahoo documents turned over during the shareholder case in Delaware court show.
Yahoo agreed to revisions that will make it more difficult for employees to qualify for severance pay after a takeover. The changes also limit the eligibility period to the first year following a sale and allows the board to scrap the plan entirely — an option that wasn’t available under the original terms.
The revisions also specify the severance packages won’t be available if Yahoo decides to sell its search operations to Microsoft. That’s a deal several major shareholders are trying to make happen. The revisions to the severance plan take effect immediately, but will expire in 90 days if the lawsuit settlement isn’t approved by then.
Yahoo is laying off 1,500 employees, or about 10 percent of its work force, as a cost-cutting plan, but those firings weren’t covered by the severance plan for takeovers.
The company’s venture in Taiwan also began cutting its workforce on Wednesday, Yahoo-Kimo Inc (雅虎奇摩) said in a statement.
Layoffs are expected to account for 10 percent, or between 50 and 60 people, of the local venture’s employees, the Chinese-language Liberty Times (the Taipei Times sister newspaper) reported yesterday, citing people who were axed by the company.
ADDITIONAL REPORTING BY STAFF WRITER