Is a Yahoo AOL tie up on the cards? Starboard Value LP, an activist investor, announced a significant acquisition of Yahoo shares on Friday. The company urged the struggling Sunnyvale-based multinational Internet corporation to reduce costs, use its Asian assets to make money, and seek a tie-up with AOL Inc.
Yahoo is full of cash after Alibaba’s IPO. Investors are scared it will start buying up companies aggressively again. Something it has been doing for the last two years with disappointing results.
In a letter to Yahoo’s CEO Marissa Mayer and its Board of Directors, Starboard highlighted the following opportunities the company should pursue:
- Unlock the considerable value from Yahoo’s non-core minority equity stakes in Alibaba and Yahoo Japan in a structure that optimizes value for Yahoo shareholders “in a tax-efficient manner”.
- Substantial cost efficiencies throughout the company should be carried out. “Specifically with a goal of reducing losses in the Display business by between $250 and $500 million.”
- Stop buying up companies so aggressively. The $1.3 billion spent on acquisitions since 2012 have had virtually no impact on revenue growth.
- Explore a strategic combination with AOl Inc. A move that could enhance Yahoo’s competitive position and deliver synergies of up to $1 billion.
Starboard wrote:
“We believe that the execution of these initiatives would produce tremendous value for shareholders, and are squarely within the control of the Company’s management and board of directors (the “Board”). We look forward to engaging directly with you to discuss the details of how these actions can be implemented in a timely manner.”
