Microsoft eyes Yahoo retention plan: court papers

By Eric Auchard

SAN FRANCISCO (Reuters) - Microsoft Corp (MSFT.O: Quote, Profile, Research) has considered earmarking $1.5 billion to retain Yahoo Inc (YHOO.O: Quote, Profile, Research) employees if it acquires the company, according to court documents in a shareholder suit filed against Yahoo.

The $1.5 billion figure was discussed in a communication between the general counsels of Microsoft and Yahoo, and came to light when a lawyer representing Yahoo mentioned the amount in a March 24 hearing in a lawsuit in Delaware Chancery Court.

Edward Welch, the lawyer representing Yahoo, also said during the hearing that 1,000 layoffs Yahoo made in February were the only job cuts the company planned to make. "There are no more reductions in force planned for the future," he said.

Two Detroit pension funds have filed the shareholder action against Yahoo and its board of directors asserting that the Silicon Valley company has failed Yahoo shareholders by not responding in good faith to Microsoft's takeover offer.

Plaintiffs firm Bernstein Litowitz Berger & Grossmann LLP released a transcript of the hearing on its site here

The details were first reported by the Wall Street Journal on Tuesday.

Separately, Microsoft is weighing nominating its own slate of directors for Yahoo's board while keeping its options open on putting a merger offer directly to shareholders, the Journal reported, citing unnamed people familiar with the matter. The proxy slate move could come as early as Wednesday, it said.

Microsoft had set a deadline of last Saturday for Yahoo to agree to its unsolicited $31 per share cash-and-stock offer but the two appear to have entered a standoff over deal terms.