microsoftlogoMicrosoft is preparing to raise the hostility in its bid to takeover Yahoo according to the New York Times’ DealBook. The next move is to authorize a proxy fight this week which then enables Microsoft to nominate its own board of directors for Yahoo by March 13th.

Such a move is possible because Yahoo does not have a staggered board, where different directors go up for re-election at different times. All of its board members are up for election this year. Microsoft would just need to obtain a relative majority of the votes cast to put its own nominees in place. This new board could then approve Microsoft’s initial offer.

This move is actually a much cheaper alternative for Microsoft as opposed to raising its bid. A raise of just $1 from the current $31-a-share offer would cost the company $1.4 billion dollars. By contrast, this proxy fight will cost Microsoft just $20 million to $30 million.

Speculation had been that Microsoft wanted to avoid taking such a hostile approach as it runs the risk of alienating – or losing – many of the current Yahoo employees if it was to succeed in its takeover attempt. However, Bill Gates also said yesterday that Microsoft currently has no plans to up its current offer to Yahoo, which it still views as a very fair deal.

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