The Chief Executive Officer of Yahoo! Inc. – Marissa Mayer – has been put under a lot of pressure lately to sell the U.S.-based company or change its cash management policy. After a recent call from Starboard Value LP for Yahoo to merge with AOL Inc., a letter was sent yesterday to Mrs. Mayer and the Chairman of SoftBank Corp. – Mr. Masayoshi Son by the investment advisory firm Alternative Investment Management & Research SA, with a proposal of a merger between the two companies.
The speculations over any possibility of a deal between Yahoo and AOL Inc. were started on Friday last week, when activist investor Starboard Value sent a letter to Chief Executive Officer Mayer pushing her towards a union between the two companies. As reported by USA Today, this was considered an attempt to “unlock tremendous value for the benefit of all Yahoo shareholders.”
Mayer, who took over as Yahoo CEO two years ago, has been putting her efforts into winning back customers from Yahoos competitors, having focused on acquisitions and improving the companys products.
An eventual merger between AOL and Yahoo could form a new, more competitive player in the Web video industry. However, strong growth will still remain uncertain. Nevertheless, a deal between the companies is believed to be beneficial for the competitiveness of their core advertising business.
According to Starboards analysis, reduction of expenses after an eventual deal is expected to help the newly-formed company to generate large savings, which may account to as much as $1 billion, but the deal would not ensure business growth.
“Neither company is a leader in ad dollars, and other than cost savings, there is little to gain by combining them,” said in an interview for Reuters Erik Gordon, a professor at the Ross School of Business at the University of Michigan.
Meanwhile, a merger deal with Masayoshi Sons SoftBank Corp. is also seen by some analysts as a possible variant for the Silicon Valley companys future development.
Albert Saporta, managing director of Alternative Investment Management & Research, said in a letter to Mayer and Masayoshi Son: “We think that Yahoo would be far better off under the stewardship and vision of Mr. Son than under Yahoo’s current top management. We would rather have Mr. Son in charge of investing Yahoo’s cash hoard.”
Yahoo! Inc. fell by 0.34% on Monday on the NASDAQ to close at $40.52 per share, marking a one-year change of +20.77% and valuing the company at $40.30 billion. According to CNN Money, the 22 analysts offering 12-month price forecasts for Yahoo! Inc. have a median target of $42.00, with a high estimate of $48.00 and a low estimate of 432.00. The median estimate represents a +3.65% increase from the last price of $40.52.