Yahoo! had planned to reject Microsoft's bid

SAN FRANCISCO - Yahoo! made plans to reject a takeover offer from Microsoft months before the software giant had even tabled its $44.6bn (£22.6bn) bid in January, according to company documents made public this week.

Attorneys working on behalf of Yahoo! investors taking legal action against Yahoo! convinced a US court judge to unseal the company's board minutes and other confidential documents on Monday.

The board minutes from last October reveal that Yahoo!'s directors discussed the likelihood "that a third party would make an offer to purchase the company". Jerry Yang, Yahoo!'s chief executive, was given permission to reject any offer from this third party, which the attorneys allege was Microsoft.

Microsoft did not make its initial $31 per share takeover offer until three months after this board meeting. The offer was rejected by Yahoo!

The lawsuit is also seeking to force Yahoo! to drop its employee severance plan, which the attorneys say is a strategy to make a takeover hugely expensive.

The severance plan, which was adopted by Yahoo! on February 12, would have allegedly added up to $2.1bn onto Microsoft's costs if its initial offer was accepted. Total costs would have depended on how many Yahoo! employees were made redundant after the takeover.

Yahoo! defended it severance plan and said in a statement: "We adopted this plan to preserve the company's most valuable asset -- its employees -- at an unprecedented time in the company's history."