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 Starboard, which owns about 1.7 percent of Yahoo, said last week it
was seeking to remove the entire board of the company after pushing
for changes since 2014.
Four years after Marissa Mayer took over as chief executive and
promised a turnaround, Yahoo continues its struggle to keep up with
Alphabet Inc's <GOOGL.O> Google and Facebook Inc <FB.O> in the
battle for online advertisers.
Yahoo shares have risen about 5 percent since March 23, the day
before Starboard called for the changes. The stock has fallen 18
percent over the past 12 months, but is up 10 percent so far in
2016.
More than a half-dozen investors of various sizes and investment
strategies contacted by Reuters this week, including an executive at
one of Yahoo's 10 largest shareholders, all praised Starboard's move
as one that would help provoke necessary changes.
Many investors declined to comment, making it hard to determine if
Starboard's move would succeed. The shareholders who spoke represent
a small percentage of what Starboard would need to take control of
the board.
Yahoo declined to comment for this article.
In February, Yahoo said it would auction off its core business while
attempting to split its stakes in Chinese e-commerce leader Alibaba
Group Holding Ltd <BABA.N> and Yahoo Japan from the rest of the
business. Yahoo holds a 15.27 percent stake in Alibaba and a 35.49
percent stake in Yahoo Japan.
Some investors said they have become disenchanted with Mayer. Others
said they were never fans of her but bought the stock expecting
strategic moves that would boost its value.
None voiced support for Mayer.
"There's going to be overwhelming support for the Starboard slate if
there is not material value creation ahead of the annual meeting"
through an asset sale, said Jeff Lignelli, chief executive of
Incline Global Management in New York, which owns about a million of
Yahoo's roughly 950 million shares outstanding.
Lignelli said he began buying Yahoo shares two years ago. "We
weren't necessarily Mayer fans, but we were fans of the future of
Alibaba" and other parts of Yahoo, he said, adding he would now
support the dissidents.
Ted Chen, a portfolio manager at Water Island Capital in New York,
which has about 759,000 shares of Yahoo, said his firm also would
likely support Starboard's slate of directors if no deal is reached
before the annual meeting in the summer.
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"We have lost some faith in this board doing the right thing," Chen
said. "I want to make sure we have a chaperone in the boardroom."
Last week, after Starboard's announcement, Yahoo set an April 11
deadline for preliminary bids, which could yield a deal by June or
July, before the annual meeting, the Wall Street Journal has
reported.
Yahoo, whose core Internet business includes search, mail and news
sites, said it has improved the Web properties by focusing on
mobile, social networking, native advertising and video.
Starboard's goal of selling the core business is in line with
Mayer's plan, and in a public letter on Thursday Starboard wrote
that it wanted to ensure a "full and fair sale process."
"The same management team and Board that has failed shareholders for
years wants shareholders to entrust them with one of the most
crucial decisions yet to be made," Starboard founder Jeffrey Smith
wrote, referring to the auction.
Analysts said that after years of failing to restore growth, Yahoo's
management has a credibility problem with investors, who see a deal
raising asset value.
"What's taking place now puts the current board's feet to the fire,"
said Victor Anthony, analyst at Axiom Capital. Brian Wieser, an
analyst at Pivotal Research Group, predicted that Starboard would
easily win a proxy fight.
Mario Gabelli, whose investment firm owns 2 million Yahoo shares,
and several others said they would likely support only some of
Starboard's slate. Gabelli said he would not want to give Starboard
control of Yahoo without a significant premium, but that it would be
important to send a message to Yahoo leadership.
"Something has to be done," he said.
(Editing by Peter Henderson and Richard Chang)
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