At least two top-10 Yahoo shareholders are so unhappy with chief executive Marissa Mayer's turnaround efforts that they are making a plea to AOL chief executive Tim Armstrong to explore a merger and run the combined company.
Their move follows an activist campaign by hedge fund Starboard Value LP, which is pushing Yahoo to deal with AOL and unlock Yahoo's valuable stakes in Asian web companies.
Armstrong has been receptive to these shareholders and acknowledged the potential benefits of a deal, the Yahoo investors said.
However, he has downplayed the possibility of a deal, said the investors and two sources close to AOL.
There are no talks between the companies and he has indicated he would only consider a friendly deal.
AOL and Yahoo declined to comment.
Two top-10 AOL investors said they also met with Armstrong in recent weeks to discuss the possibility of a deal with Yahoo. These shareholders were left with the impression that a combined company could yield $1.5 billion in cost savings.
Starboard seemingly wants Yahoo to spin off its web and email business, merging them into AOL, one Yahoo investor said.
That would leave Yahoo's holdings in Chinese e-commerce giant Alibaba and Yahoo Japan in a separate company, satisfying investors who want the company to monetise those assets.
Starboard was once active in AOL, and lost a 2012 battle to unseat three board directors.
Yahoo’s market value is $47 billion (€38bn), while its Alibaba stake alone is worth $44 billion, meaning the current Yahoo share price reflects little value to the core business. Some investors see the email, website and other operations worth $7 billion.
Armstrong, a former Google executive who has been at the helm of AOL since 2009, is credited with reviving a dying brand. AOL's market capitalisation of $3.5 billion has doubled during his tenure.
Yahoo’s stock has tripled since Mayer joined as chief executive in July 2012, but analysts say those gains have been primarily driven by the rapid appreciation in the value of its Asian assets.
Mayer has urged investors to be patient with what will be a multi-year effort to revitalise the company. – Reuters
