Activist Yahoo Investor Seeks to Remove Board, Proposes Alternative Directors

marissa mayer - H 2016
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marissa mayer - H 2016

The company suggests a former DirecTV CEO and an ex-NBCUniversal top executive, among others, setting the stage for a showdown with Yahoo CEO Marissa Mayer.

Hedge fund Starboard Value is looking to replace the entire board of Internet giant Yahoo with its own director nominees.

The company, which owns a 1.7 percent stake in Yahoo, unveiled its suggestions for an alternative board, setting the stage for a showdown with Yahoo CEO Marissa Mayer, who has been trying to boost the company's financials via acquisitions, cost cuts and other measures.

Among Starboard's board nominees are former NBCUniversal president of TV networks distribution Bridget Baker, former DirecTV boss and current Tribune Publishing board member Eddy Hartenstein, investment banker Tor Braham, Charter Communications director Lance Conn, technology executives Dale Fuller and Richard Hill, Bankers Trust COO Debra Janssen, Tesla director Brad Buss and Starboard CEO Jeffrey Smith.

"Yahoo's current board has failed to deliver results for shareholders," Starboard said. "Significant board change is desperately needed to hold management accountable and properly oversee any operational turnaround plan, separation or sale of assets."

It added: "We believe that Yahoo is deeply undervalued, and opportunities exist within the control of management and the board of directors to unlock significant value for the benefit of all shareholders. Unfortunately, as we have outlined in previous letters, we have been extremely disappointed with Yahoo's dismal financial performance, poor management execution, egregious compensation and hiring practices, and general lack of accountability and oversight by the board. We believe the board clearly lacks the leadership, objectivity and perspective needed to make decisions that are in the best interests of shareholders."

The firm said it would deliver to Yahoo a formal nomination notice "of our intention to seek the election of nine highly qualified director nominees at the 2016 annual meeting" later this year.

Earlier this year, Starboard had called for new management and said it would push for board changes if Yahoo wasn't making changes quickly enough. Starboard has been more in favor of a sale of all of Yahoo or its core search business.

Sunnyvale, Calif.-based Yahoo has said it was considering such a sale and was reaching out to potential buyers, with the process still in its early stages. Telecom giant Verizon, Barry Diller's IAC and Time Inc. along with private equity firms have been mentioned as possible suitors.

Yahoo previously reversed a plan to spin off its stake in Chinese e-commerce powerhouse Alibaba.

In 2012, Dan Loeb's Third Point also battled Yahoo management for leadership and other changes. The firm eventually got board seats and helped bring in Mayer. Fights over corporate boards, so-called proxy fights, rarely lead to the replacement of full boards but can lead to management concessions or instigate at least some of the changes that activist investors are looking for.

Yahoo "noted" Starboard's announcement and said: "The board's nominating and governance committee will review Starboard's proposed director nominees and respond in due course."