Yahoo Gets A New, Microsoft-Friendly Severance Plan

Could severance provisions at Yahoo (YHOO) create a billion-dollar roadblock in the way of a theoretical new takeover attempt from Microsoft (MSFT)?

Not anymore, no.

Bloomberg: Yahoo Inc., owner of the second most-popular U.S. Internet search engine, won a judge’s approval of a settlement mandating changes to the company’s severance plan that investors contend will make it easier for Microsoft Corp. or other potential suitors to buy it…

The settlement amounted to “an extraordinary victory” for investors seeking to remove stumbling blocks to an acquisition, said Joel Friedlander, a lawyer for two Detroit pension funds that sued over Yahoo’s handling of the Microsoft offers..

At a hearing in Georgetown, Delaware, yesterday, Friedlander told Chandler that the plan would have forced Yahoo to pay as much as $1 billion in severance if Microsoft’s bid had been accepted.

Friedlander also noted that Microsoft officials saw Yahoo’s revised severance plan as creating “bad retention,” according to court papers unsealed in the case.

“The plan was an attempt to gum up an acquisition by Microsoft,” he said. The accord “makes a search-engine deal more likely.”

Under the settlement, Yahoo will alter the plan to allow investors to launch proxy fights without triggering severance payments to employees, according to court papers. It also changed the terms of the plan to make it harder for workers to claim severance benefits if the company receives an offer.

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