San Francisco: Yahoo has faced renewed pressure from an activist shareholder when Starboard Value sought to deter the internet company from making any large acquisitions. Jeffrey Smith, managing member of Starboard Value, wrote to Yahoo chief executive Marissa Mayer after rumours that the Silicon Valley company could be considering a deal to buy cable TV channels, including Scripps Networks Interactive and Time Warner’s CNN.
The shareholder, who lobbied for Yahoo to tie up with AOL in a previous letter, said it was “increasingly concerned” that the company could use the proceeds from the sale of some of its stake in Chinese eCommerce group Alibaba to make a big purchase. Smith warned that a large acquisition or a spin-off of Asian assets in return for cash, rather than a more tax-efficient restructure of Yahoo’s remaining stakes in Alibaba and Yahoo Japan, would “be a clear indication to us that significant leadership change is required”.
Other large shareholders have also expressed “serious concerns” with the rumours of a sizeable deal, he claimed in the letter. Yahoo did not comment on the letter. Mayer has previously said the company is investigating the best way to maximise the value of Yahoo’s stake in Alibaba, which was 24 per cent before the company’s initial public offering in September, and has stressed that she is committed to returning money to shareholders as well as making acquisitions.
However she has also said that M&A is a “necessity” to achieve her aim of reviving the internet portal as it is suffering from “quite aged” technology. Since the Alibaba IPO, Yahoo has made just one major acquisition in the form of BrightRoll, a programmatic video ads platform, which it bought for $640 million in cash.
On the third-quarter earnings call in October, Mayer pushed back against Starboard Value, saying so far in her tenure at Yahoo it had spent $7.7 billion on share buy-backs compared with $1.6 billion on mergers and acquisitions. That was equal to 24 per cent of the company’s shares since July 2012, when she took over.
Shares in Yahoo, which have risen 20 per cent in the last year as many investors bought into the company for the Alibaba stake, ticked up 3.4 per cent on Thursday to $50.21 in New York after the letter was published.
Starboard Value continued to push for Yahoo to combine with AOL, another internet company that dominated in the dotcom boom of the late 1990s. It argued that this would lead to a tax-efficient separation of the Asian assets, “tremendous cost synergies” of between $1 billion and $1.5 billion” and a “strong growth platform” based on AOL’s mobile and video advertising.
Yahoo’s future has been the subject of much speculation since the Alibaba IPO, with former interim Yahoo chief executive Ross Levinsohn suggesting earlier this week that the company should be bought by Twitter, to combine its media business with the messaging platform’s specialism in real time communications.
— Financial Times
