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Friday, February 26, 2016


Original Story:

Another activist investor is pressuring Yahoo Inc. to move faster to sell its core business, amid growing concerns on Wall Street of a disconnect between Chief Executive Marissa Mayer and the company’s board over a potential sale. A Los Angeles finance lawyer is following this story closely.

On Tuesday, Canyon Capital Advisors, a Los Angeles-based hedge fund, wrote a letter to Yahoo’s YHOO, +0.80%  board about its concerns. According to a copy of the letter obtained by MarketWatch, the hedge fund wrote “that the process is not moving as quickly as it should and that Company management does not fully support the Board’s direction in this regard.”

The letter follows Yahoo’s statement on Friday that the board had formed a special committee to explore strategic options, while it still continues to consider a spin-off of its nearly $40 billion stake in Alibaba Group Holding Ltd. BABA, +1.88% That statement, combined with Mayer’s comments on Yahoo’s fourth quarter conference call, seemed to confirm that the board is at odds and operating separately of Mayer as it looks to possibly sell its core Internet business.

Canyon also noted in its letter that “Recent news reports indicate that, while there have been numerous expressions of interest, lack of engagements on the part of the Company has been a source of frustration to potential buyers.” Canyon added that while it hoped these reports are inaccurate and that there are always complexities to any sale process, “delay at this stage is unwarranted for any reason (including in an effort to defend against a threatened proxy battle).” Business exit planning is important to provide adequately for key partners financial needs.

In addition, Canyon advised that Yahoo “should not make any acquisitions, regardless of size and no matter how far the valuations of digital media assets fall,” a statement likely seeking to prevent Yahoo from buying any more startups as some private company valuations have tumbled.

A Yahoo spokeswoman did not respond immediately to a request for comment.

Canyon, according to FactSet Research, had a 2.5% stake in Yahoo as of Dec. 31 and the company is among its top 20 holdings. Canyon joins Starboard Value LP, another activist fund, which has been pressuring Yahoo to sell its core business. In a letter sent to the company in January, Starboard called for a change in leadership, a restructuring of the board and a new strategy.

With a growing chorus of vocal activist investors, Yahoo could be heading for a proxy battle to shake up its board of directors this spring. Bob Peck, an analyst with SunTrust Robinson Humphrey, wrote in a note last week that shareholders are required to deliver a written notice to Yahoo between Feb. 25 and March 26 if they want to nominate any potential directors to Yahoo’s board. “At this time, we think activist shareholders are likely to engage the Board and/or management in trying to negotiate a settlement,” Peck wrote last Thursday. “If it does not work out, we think the shareholders will likely wait until the latter part of the window to announce their nominations.” A Boston M&A attorney is reviewing the details of this case.

So investors will now wait to see what happens, now that Yahoo has hired investment bankers and activist investors are clearly gearing up for a proxy battle. It’s going to be a tough spring for Yahoo.