Starboard urges Yahoo to buy back up to $4 billion of shares

Mon Mar 9, 2015 11:05am EDT
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(Reuters) - Yahoo Inc shareholder Starboard Value LP said the company's spinoff of its stake in Alibaba Group Holding Ltd was a "good first step" but it could do more, including a share buyback of up to $4 billion.

"Yahoo is in need of a major overhaul," the activist investor wrote in a letter to Yahoo's board on Monday.

Starboard recommended that Yahoo aggressively cut costs, buy back $3.5 billion-$4.0 billion of shares and separate the Yahoo Japan stake in a tax-efficient manner.

The steps could unlock $11.1 billion of shareholder value, or about $11.70 per share, Starboard said.

Yahoo, which is trying to reverse a multi-year decline in revenue, has faced increasing investor pressure more than two years after Chief Executive Marissa Mayer took the reins to lead a comeback plan.

Yahoo has spent about $4.8 billion on acquisitions and product development since the current management team took over. Starboard said Yahoo can reduce $330 to $570 million in costs per year.

Yahoo's operating costs have gone up 7 percent in 2014.

Yahoo said in January it planned to spin off its 15 percent stake in Alibaba, responding to pressure to hand over to shareholders its prized e-commerce investment.

Starboard, which owned a 0.8 percent stake in Yahoo as of November, did not mention anything about its previous push for Yahoo to combine with AOL Inc.   Continued...

A Yahoo logo is pictured in front of a building in Rolle, 30 km (19 miles) east of Geneva, in this file picture taken December 12, 2012.   REUTERS/Denis Balibouse/Files