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 Yahoo <YHOO.O> shares jumped after the company announced its board
has formed a committee of independent directors to explore strategic
alternatives, and that it has hired investment banks and a law firm
to run the process.
The launch of the auction process, a move activist hedge fund
Starboard Value and other shareholders have pushed since late last
year, showed the company was moving another step closer to selling
its core business, which includes search, mail and news sites,
rather than spin it off as previously planned.
The move follows more than three years of effort by CEO Marissa
Mayer to turn around Yahoo by focusing on mobile apps and trying to
boost advertising revenue.
Yahoo had acknowledged during its earnings last month that it was
open to exploring options for its core business.
Despite the launch, Starboard's founder Jeffrey Smith is not backing
down, and will continue his pursuit of nominating a group of
directors for the Yahoo board, people familiar with the matter said.
Smith stated in a letter to the board on Jan. 6 that if the board is
unwilling to accept the need for significant change, "then an
election contest may very well be needed so that shareholders can
replace a majority of the Board with directors who will represent
their best interests."
Even though the board is showing that it's now willing to accept
that need, Smith is still going to nominate a slate of directors to
ensure that the sales process is handled properly, people familiar
with the matter said.
The window for a shareholder to nominate a director or group of
directors to the Yahoo board begins on Feb. 25 and ends on March 26,
with the annual meeting expected to be held in May, according to the
company's proxy statement.
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"It seems pretty clear that the only reason this is happening even
is because of the threat of the proxy fight," Pivotal Research
analyst Brian Wieser said.
Starboard, which owns about 0.75 percent of Yahoo, declined to
comment.
Yahoo's attempt to sell its core business comes after shelving
previous plans to spin off its stake in ecommerce giant Alibaba
Group Holding Ltd <BABA.N>.
"Separating our Alibaba stake from Yahoo's operating business is
essential to maximizing value for our shareholders," Mayer said on
Friday.
Yahoo's board is concerned about the risk of losing a possible proxy
contest, investor Eric Jackson, of SpringOwl Asset Management, said.
Yahoo's committee of independent directors has engaged Goldman Sachs
& Co Inc <GS.N>, J.P. Morgan <JPM.N> and PJT Partners Inc as
financial advisers, and Cravath, Swaine & Moore LLP as legal
adviser.
Verizon Communications Inc <VZ.N> is among the companies seen as a
potential buyer of Yahoo's core business.
(Additional reporting by Abhirup Roy in Bengaluru and Greg
Roumeliotis in New York; Editing by David Gregorio and Tom Hogue)
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