Yahoo! Hears Takeover Footsteps

There is an old m&a adage that the best poison pill is a high stock price – that nothing deters a hostile bidder more than having to shell out huge sums for a high-flying company. While the new economy was in flower with investors, the truism held firm for scores of technology and Internet-connected companies. With their stocks in the doldrums, however, more onetime glamour stocks are deciding that the best poison pill is the poison pill itself. The latest to erect a pill-based antitakeover defense is search engine monarch Yahoo! Inc., whose shares were selling in the $20 range in early March after fetching as much as $205 in the last year. Yahoo! directors voted in a series of preferred stock purchase rights entitling holders to buy a share for $250 a pop. If the pill is triggered – a hostile bidder’s acquisition of a 15% stake or a tender for 15% or more – the exercise price drops. As it turned out, the stock price drop was only one motivator. Within days, other shoes dropped when Yahoo! warned that fiscal first quarter results would fall below expectations, CEO Timothy Koogle announced plans to step down, and the takeover rumors circulated wildly. Another tech company that installed preferred stock purchase rights after a big stock price decline was Z-Tel Technologies Inc., whose pill also has a 15% kick-in point. Among other companies voting in pills during February were: Alodor Corp.; Biospherics Inc.; Clarent Corp.; Dendrite International; DiaSystems Corp.; Divine Inter-Ventures; Equidyne Corp.; Galileo International; Horizon Pharmacies; JNI Corp.; PrimeSource; Select Therapeutics; Scott’s Liquid Gold; and Terayon Communication Systems.