Risk

Yahoo, Activist May be Heading for Proxy Fight

The ailing internet company's board adds some financial muscle with the appointment of two new directors.
Matthew HellerMarch 11, 2016

Yahoo has added two new board members — including former Broadcom CFO Eric Brandt — possibly setting the stage for a proxy fight with activist investor Starboard Value, which has been leading a revolt against Yahoo’s management team.

The appointments of Brandt and Catherine Friedman, a former managing director of Morgan Stanley, filled vacancies that recently opened up with the resignations of PayPal co-founder Max Levchin and discount stock brokerage pioneer Charles Schwab. The additions also add significant financial expertise to the board.

Starboard had been seeking seats on Yahoo’s board without a proxy fight but according to the Los Angeles Times, the board additions mean that is unlikely to happen.

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“It’s like they are giving the middle finger to Starboard,” said Eric Jackson, managing director of SpringOwl Asset Management, another Yahoo shareholder critical of CEO Marissa Mayer’s leadership.

The hedge fund has urged Yahoo to shake up its management and strongly consider a sale of the company’s core Internet business. It has until March 26 to nominate its own candidates to take over Yahoo’s board.

The Wall Street Journal said the new directors “may indicate Yahoo intends to fend off any outside attempt to seize the board. Several companies recently have taken to nominating new directors just ahead of a proxy-fight deadline, hoping to persuade other investors the board is open to change and doesn’t need [the] supervision of an activist slate.”

Mayer has been in favor of a plan that calls for Yahoo to lay off 15% of its workforce and shed unprofitable services to reduce expenses and sharpen the company’s focus on mobile, digital video, and its most popular specialties, such as sports and finance.

But Starboard and other shareholders want Yahoo to sell its Internet operations as soon as possible. If Starboard seizes control of the board, it could then fire Mayer, who has been the company’s CEO since July 2012.

“Yahoo’s board says it is still backing Mayer, but last month it also signaled that it is receptive to selling the Internet operations by hiring three investment banks to solicit offers,” the Times noted.