Exclusive: Some unhappy Yahoo investors asking AOL for rescue

Wed Nov 12, 2014 7:10am EST
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By Nadia Damouni and Jennifer Saba

NEW YORK (Reuters) - At least two top-10 Yahoo Inc (YHOO.O: Quote) shareholders are so unhappy with Chief Executive Marissa Mayer's turnaround efforts that they are making a direct plea to AOL Inc AOL.N CEO Tim Armstrong to explore a merger and run the combined company.

Their move follows an activist campaign by hedge fund Starboard Value LP, which is pushing Yahoo to consider a deal with AOL and unlock Yahoo's valuable stakes in Asian Web companies.

Armstrong has been receptive to these Yahoo shareholders and acknowledged the potential benefits of a deal, the Yahoo investors said.

But he has downplayed the possibility of a transaction, according to the investors and two sources close to AOL. There are no talks between the two companies and Armstrong has indicated he would only consider a friendly deal, the investors said.

AOL and Yahoo declined to comment. The total holdings of the Yahoo shareholders who had made overtures to Armstrong could not be determined.

Two top-10 AOL investors said that they also met with Armstrong in recent weeks to discuss the possibility of a deal with Yahoo. These shareholders were left with the impression that a combined company could yield as much as $1.5 billion in cost savings.

Starboard, which did not speak to Reuters, wants Yahoo to spin off its Web and email business, merging them into AOL, one Yahoo investor who has spoken with the activist said. That would leave Yahoo’s holdings in Chinese e-commerce giant Alibaba Group Holding Ltd (BABA.N: Quote) and Yahoo Japan Corp (4689.T: Quote) in a separate company, satisfying investors who want the company to monetize those assets.

Starboard was once active in AOL and lost a 2012 battle to unseat three board directors.   Continued...

AOL Chairman and CEO Tim Armstrong speaks during the launch of the HTC One smartphone in London, in this file photo taken February 19, 2013.   REUTERS/Toby Melville/Files