Yahoo likely to reap $11 bn in potential break-up

Yahoo! Inc shareholders are likely to reap a potential $11 billion windfall after activist investor Starboard Value LP, the privately owned hedge fund sponsor, increased pressure on Yahoo last week to break itself up, a move analysts say could amount to a $11-billion gain in market value.

Starboard had proposed that Yahoo sell its valuable stakes in Alibaba Group Holding Ltd and Yahoo Japan Corp and merge with advertising rival AOL Inc.

The ideas laid out a plan for rewarding investors who had been losing confidence in the ability of chief executive officer Marissa Mayer to create value with the acquisitions she had been making.

Yahoo, which is now worth less than its Asian investments, had put $1.3 billion toward takeovers since 2012, at around the time Mayer took over, according to Starboard. The period saw earnings before interest, taxes, depreciation and amortisation drop by almost half as revenue too slid.

Investors now hold stock valued at $40.52 that could be valued at between $51 and up to $57 according to estimates by various investment advisors.

According to Brett Harriss, an analyst for brokerage house Gabelli and Company, who spoke in a phone interview, this was a very classic sum-of-the-parts story - if you could break up the company into its different parts, it would be worth a lot more. He added, the last thing shareholders wanted was the management team going out and trying to be venture capitalists.

Meanwhile, Food World News reported Yahoo could just be on the verge of a major acquisition rather the biggest acquisition, that of AOL since its new CEO Marissa Mayer took over.

According to Starboard CEO Jeff Smith, who had urged Yahoo to acquire AOL, the two companies, would be a wonderful fit for each other. He added, a move of the type would serve to reduce the future taxes on the US company's lucrative 15-per cent stake in Chinese firm Alibaba.

If Yahoo were to buy AOL, then that would present it with "the perfect opportunity" to dispense of its shares in Alibaba while ensuring it was not over-burdened with sheer weight of capital gains tax.

Yahoo owned 15 per cent of Alibaba and 35 per cent of Yahoo Japan, both valued at $11 billion, a figure grossly in excess of the total price of the shares in Yahoo's stock. According to most speculators Yahoo would sell its stakes in the two and incur heavy taxes, then spend the rest of the proceeds on startups.