The Yahoo Lawsuits Begin: Put the Non-Blabby Deals in Your PIPE and Smoke It

What took so long? Actually, it did not take any time at all for someone to start legal proceedings against the current effort by Yahoo to sell itself. In this case, no surprise, it is aimed directly at the how of doing it. In an unusual injunction request, M&C Partners is seeking to enjoin the Silicon Valley Internet giant from using its stringent “no cross talk” rule for its potential buyers to limit possible bidding syndicates. “The No Cross Talk Provision constitutes an unreasonable anti-takeover device, designed to entrench and favor [Yahoo co-founder, director and major shareholder Jerry] Yang and the current Board,” reads the legal filing, in part. In addition, M&C does not like what it calls a “Minority Stake Promise,” which it alleges Yahoo is “requiring those who sign the Confidentiality Agreement to use any information they receive to confine themselves to a bid for only a minority stake.” That refers to the fantastically named PIPE deals — or Private Investment in Public Equity — that PE firms like Silver Lake and TPG Capital have just offered. These are bids to buy 19.9 percent of Yahoo, which will essentially give them a lot of power. Both allegations are, well, exactly what Yahoo is doing, even if it’s not for the filing’s stated nefarious reason. Thus, M&C doesn’t think that’s okay, presumably because it wants to form its own alliances to make a deal without Yahoo’s bossy rules. To be clear, Yahoo is named in lawsuits all the time for a wide variety of things, such as a case in which one group is alleging it botched a deal with the Alibaba Group over its Alipay controversy to another alleging the price it paid for in its recent $270 million acquisition of Interclick was too low. And so it is here, one of many to come, I suspect. In this one, there’s also a class-action request and various and sundry bashing of Yang.