In an attempt to avoid proxy fight the Internet company has given into the demands of one of its activist shareholders
After giving into the pressures of the activist hedge fund Starboard Value LP, Yahoo Inc. finally agreed to add four new independent directors to its board. Through the move, the company has halted the impending proxy fight supposed to break out during upcoming shareholder meeting.
The agreement clearly indicates that the board of the company along with the management had been subjected to immense pressure from the major shareholders to resolve the disagreements. According to the agreement, the hedge fund proposed to waive off the battle if the struggling Internet company were to add new directors with an immediate effect. Finally, Yahoo settled the battle and make way for the probable auction of its core businesses.
The company announced that the Chief Executive Officer of Starboard –Jeffrey Smith –along with three independent directors who are associated with Mr. Smith will become the members of the board with the immediate effect. These new directors were among the panel formed to threat the Internet company of overthrowing its entire board.
The negotiations had been going on between both parties and the parties spoke frequently in order to find a way which could avert the fate of the company off the hands of the shareholders, according to the sources familiar with the matter. According to Reuters, the source privy to the matter informed that both parties were set to have talks in March but the situation aggravated when Yahoo appointed two new boards members and the talks ended in deadlock.
The takeaway of the agreement is that Starboard’s CEO will also join the company’s strategic review committee which is supervising the company’s sale of the core business –something aggressively favored by Mr. Smith.
According to Eric Jackson, the deal only allows Mr. Smith to be part of the committee without giving him any board control. Mr. Jackson is the managing director at SpringOwl Asset Management –which is a fund that owns shares of the Internet company.
The company further announced that two of its directors –Sue James and Lee Scott –will vacate their positions at the annual meeting. After the inclusion of the four new directors, the Internet company’s board will comprise of 11 members.
Until now, no formal date has been announced by the company of its annual meeting however historically, the meetings have been held by the company during late June.
Starboard owns around 1.% of Yahoo and it has been quite vocal and aggressive regarding few changes which included the removal of some top officials including company’s CEO, Ms. Mayer.
Yahoo had had great performance to its credit but after the financial crisis of 2008, the company couldn’t uplift itself in a more positive way and it angered few of its activist shareholders –which include hedge fund heavyweights Daniel Loeb and Carl Icahn –over its performance.
The positive point for the company is that through this agreement, the company is most likely to put the costly and distracting proxy fight behind it. The Internet giant can now focus solely on the bidding of its core business which has queue of potential buyers including Verizon Communications.
At the market which closed on Wednesday, Yahoo Inc. stock stood at a price of $36.95.