Investors Pushing for Yahoo! AOL Merger
As Yahoo! Inc., continues to struggle with its finances, investors are urging CEO Marissa Mayer to acquire the entertainment company AOL Inc., to boost growth and revenue in the company.
In a letter addressed to Mayer, hedge fund investor Jeffery Smith asked the CEO to consider tying up with AOL Inc and stop making further acquisitions that are yielding no revenue. He also asked her to take considerable steps to cut down on the taxes the company could acquire for selling $140 million worth of shares during Alibaba's blockbuster IPO.
Smith added that he has bought a considerable amount of stake in Yahoo through Starboard Value LP, his investment firm, to show his faith in the company and push for the merger with AOL, which would create $1 billion worth of synergies and by reducing overhead costs and boosting advertisement thus drawing in more traffic.
"The management and board of Yahoo have a tremendous opportunity to create significant value for its shareholders," Smith wrote in the letter, according to The New York Times.
Mayer confirmed that she had received the letter and would only make a move after the deal has been reviewed carefully.
"Going forward, we have great confidence in the strength of our business. The management team and the board of directors remain committed to building value for all shareholders through the continued execution of our strategy, investing in products that will drive sustainable growth: search, communications, digital magazines and video," Mayer was quoted by the Times.
Experts think that though Mayer may not go forward with the deal, the letter has put the CEO in a tight spot.
"I don't think it will happen but I do think Yahoo is now in play. It puts more pressure on Mayer," Eric Jackson, founder of financial firm Ironfire Capital told Reuters. "Between now and four months from now someone will want to submit a short board slate and they will have a strong case."
"Mayer is really under the gun to create value for shareholders and prove she is doing a better job than anyone else can do," Jackson added. He owns stake in Yahoo!
