Starboard Value Wants New Yahoo Board

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Yahoo-logoYahoo has been struggling, and hedge fund Starboard Value has a solution: replace the entire current board of directors. Known as an activist group, Starboard was successful in ousting Darden Restaurants' board in 2014 and gave us a great example of a persuasive PowerPoint deck. So far, we see a letter to shareholders, but with the same persuasive language. The opening is shown here:

NEW YORK, March 24, 2016 /PRNewswire/ -- Starboard Value LP (together with its affiliates, "Starboard"), one of the largest shareholders of Yahoo! Inc. (NASDAQ: YHOO) with an ownership interest in approximately 1.7% of Yahoo's outstanding shares, representing an investment of approximately $570 million, today announced that it is nominating a slate of nine highly qualified candidates for election to Yahoo's Board of Directors at the 2016 Annual Meeting.

Starboard also announced today that it has delivered the following open letter to Yahoo shareholders, which includes the names and detailed biographies of each of Starboard's nominees towards the end:

A LETTER TO THE SHAREHOLDERS OF YAHOO! INC.

Yahoo's Current Board has Failed to Deliver Results for Shareholders

Significant Board Change is Desperately Needed to Hold Management Accountable and Properly Oversee any Operational Turnaround Plan, Separation, or Sale of Assets

The Board Refuses to Embrace the Need for Significant Changes at Yahoo

Starboard is Therefore Nominating a Slate of Nine Highly Reputable and Extremely Qualified Directors for Election at Yahoo's 2016 Annual Meeting

The letter goes on to say, "We believe that Yahoo is deeply undervalued and opportunities exist within the control of management and the Board of Directors (the "Board") to unlock significant value for the benefit of all shareholders.  Unfortunately, as we have outlined in previous letters, we have been extremely disappointed with Yahoo's dismal financial performance, poor management execution, egregious compensation and hiring practices, and general lack of accountability and oversight by the Board.  We believe the Board clearly lacks the leadership, objectivity, and perspective needed to make decisions that are in the best interests of shareholders."

CEO Marissa Mayer has made several attempts to trim the business, but the company may be sold. In the shareholder letter, Starboard criticizes the process: "Bidders are uneasy over what was described as an uncharacteristically long document, three to four times longer than usual, without inclusion of private financial information." The board is accused of dealing unfairly in the process.

Discussion Starters:

  • Read the Starboard Value letter to shareholders. What principles of persuasion are illustrated? How do the word choices contribute to or detract from the argument?
  • How should Marissa Mayer respond? Research the Darden situation to draw some comparisons.
  • Do you think we'll see a detailed PPT deck, as we did for the Darden situation? Why or why not? What are the similarities and differences in the businesses that may drive the genre choice?