Yahoo may face lawsuit flood after talks collapse

By Michael Erman - Analysis

NEW YORK (Reuters) - Yahoo Inc likely faces a flood of shareholder lawsuits for rejecting a $47.5 billion takeover bid from Microsoft Corp, even if investors find holding the company responsible to be an uphill battle.

Microsoft pulled its sweetened $33-per-share offer on Saturday because the Internet company was holding out for $37 per share, even though Microsoft's price was more than 70 percent above where Yahoo shares were trading before the takeover battle started more than three months ago.

"I think it's pretty hard for the Yahoo board to turn down $33 when they've shown no ability to turn around their stock price," said Stuart Grant, managing director at Grant & Eisenhofer, a law firm that specializes in bringing investor lawsuits.

"There's going to be breach of fiduciary duty lawsuits and I must tell you they are looking pretty good right now," he said.

Yahoo already faces at least seven lawsuits over its handling of the Microsoft offer, dating back to the company's initial refusal of a deal in February. More could be in the works, lawyers said.

Mark Lebovitch, partner at Bernstein, Litowitz, Berger & Grossmann, is representing two retirement funds for municipal workers in Detroit in a class action suit against Yahoo and its board.

The lawsuit argues that Yahoo explored link-ups with companies such as Google Inc and Time Warner Inc's AOL only to stave off a deal with Microsoft. It also claims these deals would destroy shareholder value.

"Essentially, threatening to destroy the company just so Microsoft can't get it is unlawful," Lebovitch said.