The biggest ever initial public offering (IPO) debut by Chinese e-commerce giant Alibaba in the US market seems to have brightened the prospects of beleaguered tech company Yahoo Inc, which is one of AOL’s shareholder.
Activist investor Starboard Value LP on Friday announced acquisition of a “significant” part of stake in Yahoo Inc and also urged it to explore prospects of merger with AOL Inc.
Notably, Starboard is the second activist investor that have targeted the technology company in the last three years.
The activist investor also said that the company should quickly enter into “monetizing” its Asian assets that exceed the value of enterprise of its actual business.
Meanwhile, the news of acquisition pushed Yahoo shares to rise 4.4 percent to close at USD 40.60. On the other hand, the AOL shares surged 3.7 percent to close at USD 44.55 on Nasdaq.
Market watchers said that the recent development is another effort by Yahoo to revamp its revenue growth that has lagged behind in the recent years against its internet rivals like Google Inc, Twitter Inc and Facebook Inc.
Starboard sent a letter to Yahoo Chief Executive Marissa Mayer detailing about its upcoming plans for “engaging directly” with Yahoo and their timely execution.
In a statement late on Friday, Mayer confirmed that the internet company would review the letter soon.
According to the Yahoo officials, the company would provide an update on its initiatives for capital allocation during its third-quarter earnings call.
Starboard, which is also AOL’s former activist investor, claimed that the suggested Yahoo-AOL merger could lead to the creation of up to USD 1 billion in “synergies” by reduction in the overlaps in online display advertising as well as the other overhead costs.
Meanwhile, Alibaba declined to comment on Starboard’s proposal.
By recommending a Yahoo-AOL merger, the activist investor has once again revisited a proposal that crops up in every few quarters as the Internet powerhouses of the 1990s try to regain their footing over the years. Both Yahoo and AOL have witnessed shrinkage in their online ad market share in the recent years.