Yahoo! Inc., the Internet company exploring strategic options, was sued by investors who contend the board is shirking its duties to seek the best possible price for the company if it’s sold.
The Sunnyvale, California-based company has instituted bidding rules that discourage acquisitions that would lead to replacement of the directors including co-founder Jerry Yang, M&C Partners III contends in a Dec. 1 lawsuit filed in Delaware Chancery Court in Wilmington.
Yahoo “has adopted a confidentiality agreement” for bidders, prohibiting them from talking with other bidders and to “confine themselves to a bid for only a minority stake,” M&C lawyers said in court papers.
Alibaba Group Holding Ltd. and Softbank Corp. are in advanced talks with Blackstone Group LP and Bain Capital LLC about making a bid for all of Yahoo, three people with knowledge of the matter have told Bloomberg News.
In the lawsuit, M&C claims the so-called no cross-talk provision “constitutes an unreasonable anti-takeover device” and “tilts the playing field” in favor of Yang, who wants to keep “a disproportionate influence” over company affairs.
The lawsuit was assigned to Judge Sam Glascock III, who will have to decide whether to grant M&C’s request to invalidate the “minority stake promise” as “unlawful and unenforceable,” according to court papers.
“We aren’t commenting,” said Dana Lengkeek, a Yahoo spokeswoman, in an e-mail message.
The case is M&C Partners III v. Jerry Yang and Yahoo! Inc., CA7082, Delaware Chancery Court (Wilmington).