Hedge fund still pushing Yahoo-AOL offer

 

Marissa Mayer in 88 seconds

You’ve received … a bidding war?

Shares of AOL ( AOL , Tech30 ) rose 5% Thursday soon after activist hedge fund Starboard Value once once again urged Yahoo ( YHOO , Tech30 ) CEO Marissa Mayer to purchase AOL.

AOL surged earlier this 7 days after Bloomberg documented that Verizon ( VZ , Tech30 ) could be hunting to do an AOL offer.

Starboard, which owns a little stake in Yahoo, initial suggested in a letter to Yahoo in September that it appear to merge with AOL. The rationale? Yahoo would be capable to minimize far more than $ one billion in fees and also increase its cellular and video advertising enterprise in accordance to Starboard.

In Thursday’s comply with-up letter, Starboard managing member Jeffrey Smith reiterated that Starboard believes a purchase of AOL is its greatest training course of motion. AOL and Yahoo equally declined to comment.

Curiously, Smith did not mention the Verizon speculation in his letter. If Verizon was significant about acquiring AOL, it would likely be capable to outbid Yahoo given that it is a significantly bigger organization.

 

Verizon-AOL: You’ve received sale?

And that could leave some Yahoo buyers worried since several come to feel that a deal with AOL is unavoidable and that a combined company could be capable to contend far more effectively in opposition to Google ( GOOGL , Tech30 ) and Facebook ( FB , Tech30 ) .

Yahoo and AOL merger rumors have been all around fairly significantly considering that AOL was spun off from Time Warner ( TWX ) many years ago. (Time Warner owns CNNMoney.)

They have intensified lately since Yahoo has far more money it can use for acquisitions thanks to its stake in Chinese e-commerce giant Alibaba ( BABA , Tech30 ) , which went general public in September.

Yahoo is anticipated to soon announce what it intends to do with the remainder of its Alibaba stake that it has not already sold, as properly as a minority stake in Yahoo Japan.

Some analysts have recommended that Yahoo need to just sell alone to Alibaba. But others have fantasized about all the approaches Mayer can commit her Alibaba treasure trove.

Most not too long ago, there have been some really obscure stories about Yahoo probably getting intrigued in creating an provide for cable firm Scripps Networks Interactive ( SNI ) , which owns the Foods Community.

Smith alluded particularly to that rumor in Thursday’s letter, stating that Starboard has “turn into ever more worried thanks to the expanding amount of media studies indicating Yahoo’s interest in carrying out large-scale acquisitions.”

AOL would be a massive-ish acquisition its market place price is only $ three.8 billion. Scripps is really worth a lot more than $ ten billion.

But Smith did not point out an additional rumor that’s created the rounds this 7 days: that Yahoo and Twitter ( TWTR , Tech30 ) need to merge. That would be the costliest deal of all for Yahoo. Twitter’s market price is virtually $ 24 billion.

So will Starboard be ready to put adequate stress on Yahoo and Mayer to merge with AOL? That doesn’t appear most likely just nevertheless. Though Starboard owns about 7.7 million shares in Yahoo, that functions out to much less than a 1% stake in the company.

Starboard has experienced achievement in pushing for adjustments at firms exactly where it acquired more substantial positions. Most notably, the hedge fund received handle of the board of Olive Backyard garden operator Darden Restaurants ( DRI ) very last calendar year. Smith is now the firm’s chairman, and the inventory has surged given that Starboard took more than .

Starboard has also acquired sizable stakes in office provide stores Staples ( SPLS ) and Place of work Depot ( ODP ) . The two stocks have shot up on hopes that Starboard will try and drive the two to combine .

But Starboard also attempted (and unsuccessful) to take manage of AOL back again in 2012.

No matter of what happens, AOL shareholders have to be content. The inventory lagged the broader market place in 2014. So buyers most likely would welcome a lengthy takeover saga.

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