Activist investor Starboard Value LP delivered another sharp letter Thursday to Yahoo CEO Marissa Mayer and the Sunnyvale company s board of directors, reiterating its push for the company to merge with AOL.
The hedge fund s manager Jeff Smith wrote of his increasing concern due to the growing number of media reports indicating Yahoo s interest in doing large-scale acquisitions. The latest reports speculate that Yahoo may be considering an acquisition of cable assets including Scripps Networks Interactive and Time Warner s CNN.
It seems a bit odd for Smith to cite the CNN rumor, since it was based on an entirely speculative 2015 prediction by The Information. And the Scripps chatter was based on rumored discussions last year.
But still, Smith says our concerns are that these media reports may have some truth are exacerbated as it has now been more than 60 days since the IPO of Alibaba, and Yahoo is now free to disclose its intentions with regard to its shares of Alibaba. However, to date, no announcement has been made regarding Yahoo s plans for a tax-efficient separation of its non-core minority equity interests.
To improve profitablity of its core business, Starboard reiterates its idea, also expressed in September, that an AOL-Yahoo combination will allow:
(i) a tax-efficient separation of the non-core minority equity investments; (ii) tremendous cost synergies of between $1 billion and $1.5 billion; and (iii) a strong growth platform given AOL s progress in mobile and video advertising.
And if not? Says Smith to Mayer:
