Starboard Value, the activist hedge fund headed by Jeffrey Smith, will seek board control during its upcoming discussions with the leadership of Yahoo Inc. (NASDAQ:YHOO) next week, according to Reuters based on information from people familiar with the situation.
The activist investor has been pushing Yahoo to implement significant changes in Board composition, management, execution and strategy based on the reason that the company’s core business “failed to produce acceptable results.”
Starboard Value also demanded a sale or spinoff of Yahoo’s core businesses. Recent reports indicated that it was prepared to nominate a slate of candidates to the company’s Board of Directors by the end of this month.
Yahoo aims to prevent a proxy fight with Starboard
Yahoo decided to engage in discussions with Starboard Value next week to avoid a proxy fight. March 26 is the deadline for the activist investor and other shareholders to submit their nominees to the company’s Board of Directors
Starboard plans to seek at least four seats to gain control of Yahoo’s Board, which is composed of seven members according to sources.
The New York Post recently reported that the Board of Directors of Yahoo has been considering whether to two or more seats to Starboard. If the company fails to negotiate, the activist investor would launch a proxy fight.
Some shareholders were concerned that a proxy fight would delay Yahoo’s initiative to auction its assets, and it would also create doubts among potential buyers regarding the stability of the company’s Board, according to the sources.
Market observers said Starboard needs to gain the support of several large institutional shareholders and Yahoo co-founder David Filo to obtain Board seats. Filo is the largest shareholder of the company with 7.5% stake.
Yahoo exploring sale of assets
Last month, the Board of Directors of Yahoo created an Independent Committee to explore and review strategic alternatives including a possible sale of its core assets. Prior to that, the company disclosed a strategic plan to drive growth.
During the Morgan Stanley Technology, Media, and Telecom Conference on Thursday, Yahoo CFO Ken Goldman said the company is exploring a sale of its non-core assets, patents and property worth around $1 billion to $3 billion.
Time Inc (NYSE: TIME) was reportedly considering a bid to acquire Yahoo’s core internet business and contacted bankers regarding its intention to pursue a deal.
Yahoo Board and management are aligned to create value for shareholders
Goldman also rejected speculations that there is a conflict between the Board and management of Yahoo.
“I want to make it very clear that between management, Marissa, myself, the rest of the management team, and the committee, and the board, we’re actually all aligned in terms of what creates the best shareholder value, and that will be the ultimate criteria of what we end up doing,” he said.