Yahoo adds severance benefits in case of merger

A Yahoo! signs sits out front of their headquarters in Sunnyvale, California, February 1, 2008.

SEATTLE (Reuters) - Yahoo Inc put in place on Tuesday severance benefits that would be given to all employees who might be laid off if the company was sold.

Yahoo is the target of an unsolicited bid from Microsoft Corp to acquire the Web pioneer. Yahoo has rebuffed Microsoft's original bid, saying it undervalues the company.

In a securities filing, Yahoo said if an employee is dismissed without good reason within two years of change of control in the company, employees will continue to receive their annual base salary and certain benefits for at least four months and up to 24 months depending on position.

A source close to Yahoo said the severance plans were put in place to protect employees and put their minds at ease. In the filing, Yahoo also said the plans are aimed at helping to retain employees.

Under the arrangements, there will also be an accelerated vesting of any equity-based compensation owed to them prior to the termination.

Brenon Daly, an analyst at the 451 Group, said a company targeted for acquisition will often provide "golden parachutes" to take care of their employees when the company is in play.

"It's just public posturing," said Daly. "The deal's going to get done."

Microsoft has said it can wring out $1 billion in cost savings and revenue benefits from the Yahoo acquisition. Analysts expect some of the savings to come from a reduction in overlapping areas between the two companies.

(Reporting by Daisuke Wakabayashi and Anupreeta Das in San Francisco, Editing by Toni Reinhold, Phil Berlowitz)