Ya­hoo launches auc­tion process as Star­board gears up for fight

The Pak Banker - - COMPANIES/BOSS -

Ya­hoo Inc of­fi­cially launched the sale of its core busi­ness on Fri­day, a move seen as a pos­i­tive step for frus­trated in­vestors but not enough to keep an ac­tivist hedge fund from pur­su­ing a proxy fight against the strug­gling In­ter­net com­pany.

Ya­hoo (YHOO.O) shares jumped af­ter the com­pany an­nounced its board has formed a com­mit­tee of in­de­pen­dent di­rec­tors to ex­plore strate­gic al­ter­na­tives, and that it has hired in­vest­ment banks and a law firm to run the process.

The launch of the auc­tion process, a move ac­tivist hedge fund Star­board Value and other share­hold­ers have pushed since late last year, showed the com­pany was mov­ing an­other step closer to sell­ing its core busi­ness, which in­cludes search, mail and news sites, rather than spin it off as pre­vi­ously planned. The move fol­lows more than three years of ef­fort by CEO Marissa Mayer to turn around Ya­hoo by fo­cus­ing on mo­bile apps and try­ing to boost ad­ver­tis­ing rev­enue.

Ya­hoo had ac­knowl­edged dur­ing

its earn­ings last month that it was open to ex­plor­ing op­tions for its core busi­ness.

De­spite the launch, Star­board's founder Jef­frey Smith is not back­ing down, and will con­tinue his pur­suit of nom­i­nat­ing a group of di­rec­tors for the Ya­hoo board, peo­ple fa­mil­iar with the mat­ter said. Smith stated in a let­ter to the board on Jan. 6 that if the board is un­will­ing to ac­cept the need for sig­nif­i­cant change, "then an elec­tion con­test may very well be needed so that share­hold­ers can re­place a ma­jor­ity of the Board with di­rec­tors who will rep­re­sent their best in­ter­ests."

Even though the board is show­ing that it's now will­ing to ac­cept that need, Smith is still go­ing to nom­i­nate a slate of di­rec­tors to en­sure that the sales process is han­dled prop­erly, peo­ple fa­mil­iar with the mat­ter said.

The win­dow for a share­holder to nom­i­nate a di­rec­tor or group of di­rec­tors to the Ya­hoo board be­gins on Feb. 25 and ends on March 26, with the an­nual meet­ing ex­pected to be held in May, ac­cord­ing to the com­pany's proxy state­ment.

"It seems pretty clear that the only rea­son this is hap­pen­ing even is be­cause of the threat of the proxy fight," Piv­otal Re­search an­a­lyst Brian Wieser said.

Star­board, which owns about 0.75 per­cent of Ya­hoo, de­clined to com­ment.

Ya­hoo's at­tempt to sell its core busi­ness comes af­ter shelv­ing pre­vi­ous plans to spin off its stake in ecom­merce gi­ant Alibaba Group Hold­ing Ltd (BABA.N).

"Sep­a­rat­ing our Alibaba stake from Ya­hoo's op­er­at­ing busi­ness is es­sen­tial to max­i­miz­ing value for our share­hold­ers," Mayer said on Fri­day.

Ya­hoo's board is con­cerned about the risk of los­ing a pos­si­ble proxy con­test, in­vestor Eric Jack­son, of SpringOwl As­set Man­age­ment, said.

Ya­hoo's com­mit­tee of in­de­pen­dent di­rec­tors has en­gaged Gold­man Sachs & Co Inc (GS.N), J.P. Mor­gan (JPM.N) and PJT Part­ners Inc as fi­nan­cial ad­vis­ers, and Cra­vath, Swaine & Moore LLP as le­gal ad­viser. Ver­i­zon Com­mu­ni­ca­tions Inc (VZ.N) is among the com­pa­nies seen as a po­ten­tial buyer of Ya­hoo's core busi­ness.

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