Yahoo urged to overhaul its management

Yahoo was urged by activist shareholder Starboard Value LP to overhaul its management and board, saying that "significant changes" were needed at the company.

In a letter sent to Yahoo’s board and made public Wednesday, Starboard said the Internet pioneer’s recent decision to spin off its core Web businesses will require shareholders to wait another year “while the existing leadership continues to destroy value,” and that the move is “not acceptable.”

Starboard, which holds about 0.8 per cent of Yahoo’s shares according to data compiled by Bloomberg, has been agitating for change at the company for months.

In November, the fund run by Jeff Smith, asked Yahoo to drop a plan to spin off its stake in Chinese e-commerce company Alibaba Group and instead sell its main search and display advertising business or face a proxy fight for board control.

Yahoo gave Starboard some of what it wanted in December, when it abandoned the long-planned spinoff of its valuable Alibaba stake due to the risk of a large tax bill, and said it was considering bundling the rest of its assets into a standalone company. However the activist fund and other investors complained the spinoff will take too long and could also have tax implications. In December, shareholder Canyon Capital Advisors told the board Yahoo needs to prioritise selling off some assets, the core operations or the whole business.

Starboard said in its letter it believes “several” parties indicated interest in buying Yahoo’s core business. It also cited media reports saying that Yahoo has so far “ignored this inbound interest.”

With sales hovering around 2006 levels, Yahoo has been facing pressure from investors for a long time. In its letter on Wednesday, Starboard criticised Chief Executive Officer Marissa Mayer for failed attempts over her three years at the helm to turn around the core business, which "continues to be plagued with deteriorating financial performance and an accelerating number of executive leadership departures," Starboard said.

Starboard is one of the most prolific US activists and has successfully forced companies to heed its wishes in the past. Last year, the activist persuaded investors to replace Darden Restaurants' entire 12-member board after the unpopular sale of its Red Lobster chain to Golden Gate Capital. The investment firm also recently helped push office-supply rivals Staples and Office Depot into a merger.

- Bloomberg