Activist Investor Calls for Yahoo! To Merge with AOL

Outside of the digital media industry, Yahoo! has been in the news quite frequently over the last 2 years since the appointment of CEO Marissa Mayer, a subsequent flurry of diverse acquisitions, and most recently for its large stake in newly public Alibaba. This week, investment management firm Starboard Value LP, which recently acquired a stake in Yahoo!, sent Mayer a letter urging the company to merge with AOL.

“"We believe a merger of AOL and Yahoo's core business may be one of the best ways to both fully seize the cost reduction opportunity and also to tax efficiently monetize Yahoo's non-core equity holdings."” claims Starboard.

Yahoo! has been the target of many potential megadeals over time, the biggest of which was its potential acquisition by Microsoft. In fact, an acquisition of or merger with AOL has already been proposed by many different parties, and strategically it could make sense. Starboard is correct that there would be significant synergies across both companies’ businesses, and the heightened scale and improved combined portfolio of media assets paired with both companies emerging advertising technologies could be more valuable for the combined entity than separately.

However, Kara Swisher of re/code believes that this activist outcry has little to do with the merits of the proposed merger, and more to do with Starboard’s desire for Yahoo! to deliver the cash from its holdings in Alibaba and other Asian assets back to shareholders. It will be interesting to see how Mayer responds to this proposal.  

Source: http://recode.net/2014/09/27/forget-aol-activist-attack-on-yahoo-is-all-about-forking-over-alibaba-cash/

http://www.forbes.com/sites/briansolomon/2014/09/26/yahoo-aol-pushed-toward-merger-by-fed-up-activist-investor/