Yahoo sued over handling of bid

There is currently a stalemate between Yahoo and Microsoft

Web giant Yahoo has said it is facing seven shareholder lawsuits over its handling of Microsoft's unsolicited takeover bid, which it has rejected.

It also said that dealing with the unwanted proposal, worth more than $40bn (£20.2bn), was distracting for management and staff.

The comments, made in Yahoo's annual report, come as Microsoft steps up efforts to take control of the firm.

Yahoo has said it is worth more than the $31-a-share it is being offered.

But Microsoft has maintained that its cash-and-share proposal is a "full and fair" valuation.

It emerged last week that the software developer has hired a firm that specialises in corporate actions in a sign that it is preparing to try to overthrow Yahoo's board and replace it with directors more sympathetic with its objectives.

The impasse has triggered seven lawsuits against Yahoo from disgruntled shareholders, including pension funds.

Five accuse the firm, which owns one of the most popular internet search engines, of rebuffing Microsoft without trying to get a better deal.

'Significant distraction'

In its annual report filed with the Securities and Exchange Commission, Yahoo suggested that Microsoft's move had the potential to scare off business partners and made it difficult to retain and hire new talent.

"The review and consideration of the Microsoft proposal (and any alternate proposals...) have been, and may continue to be, a significant distraction for our management and employees," Yahoo said.

It added that consideration of the proposals may require "significant time and resources" to review.