In the next two weeks, observers of the Microsoft-Yahoo courtship will get a telling signal as to whether it's headed for a shotgun marriage or a friendly embrace.
Yahoo has the option of extending the March 14 deadline for shareholders to nominate an opposition slate of directors for its next annual shareholder meeting, though it is expected to maintain a hard deadline.
"It's unlikely but not out of the realm of possibility to extend the date to nominate directors," said Bruce Goldfarb, chief executive of proxy solicitation firm Okapi Partners. "I don't see the motivation for Yahoo to do that. They could still negotiate after Microsoft files its slate. There's little reason to extend the date, unless they are already negotiating a friendly deal."
My bet is that Yahoo will extend the deadline, giving it more time to contemplate its options in a manner seen as friendly to Microsoft. Think if it this way: how easy is it to carry on a civil conversation and negotiate a deal when the other party's 10 thugs are beating up on you?
Microsoft has until March 14 to name its opposition slate of directors, and proxy solicitors say the Redmond giant should have no problem finding folks to fill out a 10-member slate. Yahoo's entire 10-member board is up for re-election at the next shareholder meeting. The date of the meeting has yet to be selected.
Yahoo has plenty of reasons to enter a friendly deal and wrap up talks ASAP. It's not only facing seven lawsuits from angry investors who argue that Microsoft's initial bid of $31 a share was fair, but it also noted in its regulatory filings that Yahoo employees, management, and executives are distracted by the Microsoft bid.
Adding to that stress is the fact that its other reported options, including a News Corp. investment deal and an AOL tie-up, are considered long shots by industry observers and analysts.
And while the days are counting down for Microsoft to have its slate in place, odds makers say they wouldn't be surprised to see University of Southern California corporate-governance professor Duke Bristow show up on such a slate. Bristow has served on other proxy fights before, including Oracle's slate in its drawn-out fight for PeopleSoft. I'm not aware of Bristow's stance on Microsoft's bid, since phone calls and e-mails have not been returned.
Representatives from Microsoft deferred deadline extension questions to Yahoo. And a Yahoo spokeswoman declined comment.
Yahoo, which is incorporated in Delaware, has a hard deadline for shareholders to name candidates, unless the company changes its bylaws or delays the date of its shareholder meeting, said Stephen Jenkins, a director with Delaware law firm Ashby & Geddes, which has represented a number of clients in proxy fights.
In order for Yahoo to extend its March 14 deadline for shareholders to nominate an opposition slate, it would need to do one of two things. Yahoo could change its bylaws and extend the notification period to a time closer to when the annual shareholder meeting is held, which currently is expected to be sometime between May 18 and July 7, or it can set its meeting sometime beyond July 7, thereby extending the notification period.
"The smart thing to do would be to extend the deadline, if they don't want to talk yet but they don't want to force Microsoft's hand," Jenkins said.