Activist Investor Urges Yahoo to Merge with AOL

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It seems that Yahoo, despite of earning billions from the Alibaba IPO, has not been able to meet the expectations of its investors. The company’s CEO recently received a letter from activist investor Jeffrey Smith, pushing Marissa to merge with rival internet company AOL, per Forbes’ Brian Solomon.

As said, Jeffrey “believes a combination between Yahoo’s core search and display businesses and AOL, could result in up to USD 1 billion of synergies while also potentially facilitating the realization of value from Yahoo’s non-core equity stakes.”

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Jeffrey Smith has acquired a significant stake in Yahoo through Starboard Value LP.  In his letter, he not only accused Yahoo for acquiring dozens of startups in last two years, showing no return value, but also asked to take steps to reduce future taxes on remaining Alibaba stake.

This is for the third time activist investors have targeted Yahoo. First it was done in year 2008, when Yahoo declined the USD 47.5 billion takeover offer from Microsoft. And next in 2012, when Hedge fund manager Daniel Lobe dropped the bombshell that led to CEO Smith Thompson’s departure from Yahoo.

Analysts seem to have different views on this. Founder of IronfireCapital, Eric Jackson believes that the deal is nowhere to be seen in near future, but will definitely put pressure on Mayer to perform well. Jackson, who owns stake in Yahoo, also stated to Reuters,”Mayer is really under the gun to create value for shareholders and prove she is doing a better job than anyone else can do.”

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Mayer has welcomed Smith’s points for further discussion. She also stated that Yahoo has great confidence in the strength of its business.

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