rp

The pension fund owns 13,600 YHOO shares through mutual fund investments so they are kind of stuck. Of course, this begs the question of why they do not go after the fund(s) but that is beyond my realm of knowledge.

I would also think that an implicit part of their thinking is that if YHOO does not take MSFT's offer, the market bump in the share price that was caused by the offer will go away and the shares will be trading at sub $20 again.

Stephen Bainbridge has a good assessment of this and similar suits with additional info at: http://www.businessassociationsblog.com/lawandbusiness/comme...

The antitrust people would start off by looking at the hypothetical merged companies percentage of the relevant market. If the the relevant market is defined as "search," MSFTHOO would create an entity with only a 30% of the market compared to GOOG's 65% (based on numbers from here: http://www.hitwise.com/press-center/hitwiseHS2004/searchengi...). This is not to say the FTC or DOJ wouldn't sandbag such a deal, but how do you gain monopolisitic market power or anti-competitive effects from a 30% market share? I guess you could keep blowing up the definition of the relevant market until you captured MSFT's entire business but that seems dubious.

You just described the underlying problem with a suit such as this. There is a concept called the "business judgment rule:" if a shareholder sues the board for a breach of fiduciary duty of care, a court is unlikely to second-guess a business decision if it was made in good faith and was informed. So, the system does give deference to the judgments of the directors. Its existence is just buried deep in the folds. :-)

I disagree.

This statement assumes that "two Detroit pension funds" have enough votes to oust the board of directors or that the stock is structured in a way that they could ever get these votes, even with voting trusts or voting agreements with other shares. I can easily guess that Yahoo stock structured as such and if I am wrong, please correct me.

So, if I was managing a pension fund with languid Yahoo shares and not enough votes to do anything, my smartest and perhaps only move would be to sue. 62% ABOVE the actual market price of the stock? At that potential premium, if I did not sue, the pension fund might be coming after me as shirking my fiduciary duties. This does not mean I will win but its better than flailing around while the Yahoo board figures out a way -avoid- a merger and possibly prevent my fund from realizing 62% ABOVE market price on my sagging Yahoo shares.

So, from my perspective, it makes complete sense.