Yahoo shareholders are inching closer to a potential $11 billion windfall. Activist fund Starboard Value LP stepped up pressure on Yahoo last week to break itself up, a move analysts say could amount to an $11 billion market value gain. Starboard’s proposals include Yahoo selling its valuable stakes in Alibaba Group Holding and Yahoo Japan and merging with advertising rival AOL.
The ideas lay out a plan for rewarding investors who are losing confidence in chief executive officer Marissa Mayer’s ability to create value with the acquisitions she’s been making. Yahoo, now worth less than those Asian stakes, has put $1.3 billion toward takeovers since 2012, around the same time Mayer took the helm, according to Starboard. During that period, earnings before interest, taxes, depreciation and amortization dropped by almost half as revenue also slid. Investors are now left holding a $40.52 stock that could be valued at more than $50 in a breakup — $51 if you ask Gabelli & Co and up to $57 by Albert Fried & Co’s estimates.
“This is a very classic sum-of-the parts story: If you can break up the company into its different parts, it would be worth a lot more,” Brett Harriss, an analyst for Gabelli, said in a phone interview.