Holder Starboard issues letter with regard to media reports on potential large scale acquisition; reiterates call for Yahoo to explore combination with AOL
- However, we have recently become increasingly concerned 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. Our concerns that these media reports may have some truth are exacerbated as it has now been more than sixty 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.
- On a related note, within the past week, new speculation has emerged that Yahoo is considering a cash-rich split-off as a structure to separate its non-core minority equity interests. The resurfacing of rumors about a cash rich split-off at this juncture is particularly troubling given your acknowledgment at our meeting with you on October 27th that this option would be clearly inferior to a spin-off structure or other available alternatives to unlock the full value of the stakes in Alibaba and Yahoo Japan. As we have repeatedly explained, we believe a cash-rich split-off to separate Yahoo's non-core minority equity interests has serious shortcomings
- Further, we continue to believe that Yahoo must significantly reduce costs to improve profitability in its core business and should be considering a combination with AOL. A combination with AOL, structured properly, could accomplish all of these goals by allowing for: (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.