Yahoo just made changes that ensure all employees are entitled to their severance payments, even when just part of the business is sold – hinting a sale of its core operating business, or some other part of the company, might be nearing.
According to regulatory filings submitted Thursday, Yahoo modified the definition of “change in control” to include the sale of “substantially all of the Company’s operating business.” That means even if Yahoo only ends up selling part of its business (such as the core operating business, which includes its web services), the existing severance package will still kick-in to all employees, in case there’s a layoff post-acquisition.
The new language also lets Yahoo executives keep their monthly stock vesting schedule, and not revert back to the standard quarterly installments, if the core business gets sold. As previously reported by Business Insider, the change to monthly vesting was implemented in January 2015, but Thursday’s filing makes sure it remains in place, even after the operating business gets sold to someone else.
Yahoo is exploring a sales process, with preliminary offers from potential bidders due on Monday, even as the company moves forward in parallel with a separate plan to turn around the struggling business under CEO Marissa Mayer. In a change in control scenario, Mayer is entitled to roughly $48 million in unvested stock and options.
The changes show that Yahoo might be prepping for a possible sale of its core operating business, as it guarantees all employees, including executives, their existing severance package once part of the company gets sold.
“It’s sort of a move to protect the interest of the employees,” SpringOwl Asset Management’s Eric Jackson told us. “It reads like they anticipate, or there’s a reasonable chance that there’s going to be some kind of sale in the next few months.”
But Jackson pointed out it’s not a defensive move aimed at making a takeover more costly or difficult for potential buyers. Companies facing activist threats, like Yahoo, often make certain changes, typically called the “poison pill,” to make it a lot more expensive to buy the company. In 2008, Yahoo amended its severance plan that would have cost Microsoft an additional $3 billion to buy Yahoo, which essentially stopped its takeover bid.
Regardless, Jackson, who’s one of the most vocal critics of Yahoo, was still not happy with the move, as it doesn’t really help speed up the sales process.
“It’s not as egregious as what they did with Microsoft,” he said. “But it’s serving the employees’ needs. It doesn’t help the shareholders.”
Yahoo declined to comment.