Yahoo targeted for boot of board
Hedge fund lines up replacements
A New York hedge fund started a battle for control of Yahoo Inc. on Thursday, challenging the leadership of a 20-year-old tech giant that has struggled to profit from its huge online audience.
Starboard Value, which said it owns about 1.7 percent of Yahoo’s shares, has been pushing for changes at Yahoo for more than a year. But the activist investor group has grown frustrated by what it considers Yahoo’s lack of progress.
The fund now wants to replace Yahoo’s entire board of directors — including Marisa Mayer, Yahoo’s chief executive, and H. Lee Scott, the former president of Wal-Mart. Starboard said it considered 100 potential replacements before coming up with a list of nine, including Jeffrey Smith, managing member of Starboard, and Eddy Hartenstein, the former chief executive of media company Tribune Co.
Shareholders will be able to vote on Starboard’s nominees during Yahoo’s annual meeting, which is expected to occur in June.
“It is unfortunate that this action is necessary,” Smith said in a letter to Yahoo shareholders Thursday. But “the management team and Board of Yahoo have repeatedly failed shareholders.”
In a statement, Yahoo said it will review Starboard’s nominees and respond in “due course.”
Yahoo has been struggling to turn itself around for some time. It has spent billions on acquisitions and sought ways to profit from its large online audience. But investors appear to have lost faith, sending the company’s stock down more than 20
percent over the past year.
Under pressure from Starboard and other investors, Yahoo abandoned a plan late last year to spin off its interest in Chinese retailing giant Alibaba. The potential multibillion-dollar tax bill from such a deal would be too costly, investors argued. Instead, they said, Yahoo should sell or spin off its core business, including its iconic search engine and email services.
Yahoo has since put its core business, including its search engine up for sale. But, according to Starboard, the company is not acting quickly enough.
“Nearly two months have gone by since Yahoo officially publicly announced its intention to pursue strategic alternatives for [its core business], and it seems little progress has been made,” Smith said in his letter to shareholders.
Starboard has successfully ousted company boards before. In 2014, it went after Darden, the parent company of Olive Garden. It complained that the restaurant chain was doling out breadsticks and salad too liberally — wasting food and bloating costs.
It nominated 12 new faces for Darden’s 12-person board. Shareholders agreed, installing a Starboard-approved new leadership team. The shake-up appears to have helped. Sales at restaurants open at least a year increased during its most recent quarter, the company recently said.