Activist Hedge Fund Eyes Battle for AOL Board Seats (Report)

5:14 AM PST 02/17/2012 by Georg Szalai
Bloomberg/Getty Images

Starboard Value this week increased its stake in the online company to 5.1 percent and is looking for board representation at the firm's annual shareholder meeting.

NEW YORK - Activist hedge fund Starboard Value is preparing to battle for AOL board seats ahead of the online company's annual shareholder meeting this spring, the New York Post reported.

The financial firm, already one of the biggest AOL shareholders, this week increased its stake in the Web company from 4.5 percent to 5.1 percent after late last year calling on AOL's management, led by chairman and CEO Tim Armstrong, to change its content strategy, which it argued would continue to lose the company money.

AOL bought the Huffington Post for $315 million about a year ago to make itself a next-generation content player. But Starboard argued that AOL is losing more than $500 million a year on its display advertising business.

Now, the fund is planning to nominate its own slate of AOL board members, according to the Post. In a sign that the fund is looking to put pressure on Armstrong, a person familiar with Starboard's plans told the Post: “They will nominate [board members] next week unless they come to an agreement with the company before then.”

AOL recently reported better-than-expected fourth-quarter financials that helped boost its stock.

Starboard and Armstrong declined to comment, the Post said.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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