Yahoo Adopts Anti-Takeover Strategy

Mar 01 2001

In a move underscoring its desire to remain independent, Yahoo announced on Thursday that its board of directors has adopted a shareholder-rights plan designed to prevent a hostile takeover.

Although the Santa Clara, Calif.-based company has said it isn't being courted by other firms, stock market speculation that the portal is ripe for takeover has risen as Yahoo's stock price falls. The Nasdaq-traded company has fallen 90 percent, to $24.44 from an all-time high of $237.50 on Jan. 3, 2000.

"The rights plan was not adopted in response to any effort to acquire control of Yahoo," the company said in a statement. "The rights plan is designed to deter coercive takeover tactics, including the accumulation of shares in the open market or through private transactions and to prevent an acquirer from gaining control of Yahoo without offering a fair and adequate price and terms to all of Yahoo's stockholders."

The Walt Disney Co. and various European and Japanese telcos have been mentioned as possible suitors. Rumors that Viacom , the parent of CBS, was in talks with Yahoo sent the Web company's stock up 24 percent in January.

Although Yahoo's management has consistently said the company is not looking to merge, other Internet portals, including Lycos , have joined hands with bigger and more stable partners. Most importantly, Yahoo's chief rival, AOL , completed a splashy merger with print and broadcast media conglomerate Time Warner last year.

Yahoo executives contend that the company is stronger as an independent, which allows it to strike deals with any content or distribution partner it wants rather than being tied to a single access or content provider.

The issue has taken on greater urgency this year as Yahoo forecasts that its earnings will fall because of a slowdown in the online advertising market. In January, the company announced that though it expects a modest rise in revenues this year, profits could fall between 10 percent and 30 percent, short of the 18 percent growth that analysts had forecast. At the time, Yahoo President Jeff Mallett said the company would create more fee-based premium services, probably in the entertainment and finance fields, and that the company would move more aggressively into the corporate market.

Although Yahoo is feeling the fiscal squeeze plaguing advertising-based Internet companies in general, it has a strong brand and immense scope. The company's Web sites reach roughly 60 percent of Internet users worldwide, including 60 million registered users and 180 million visitors per month. The company has expanded into 24 countries and is ranked the No. 2 media property online, according to Media Metrix, a market research firm.