Yahoo forms committee to explore options of a possible sale

Yahoo Inc, under pressure from impatient investors, took steps on Friday to handle the possible sale of parts of the struggling Internet company.

Yahoo shares jumped after the company announced its board has formed a committee of independent directors to explore strategic alternatives. This signalled Yahoo is open to selling its core business including search, mail and news sites, rather than spin it off as previously planned.

Yahoo advisers started working on the sale process on Friday, people familiar with the matter said. The step followed more than three years of effort by CEO Marissa Mayer to turn around Yahoo, focusing on mobile apps and trying to boost advertising revenue.

Despite her efforts, revenue has dipped since she took the helm in July 2012.

Yahoo shares rose 2.26 per cent to $30.09 in midday trading.

The announcement came as activist investors appeared to be preparing for a possible proxy fight for control of the board.

Starboard, which owns about 0.75 percent of Yahoo, has been pushing for changes since 2014, asking it to separate its Asian assets and sell the core business.

On Wednesday, Bloomberg reported that Starboard was taking initial steps towards a potential proxy fight.

"It seems pretty clear that the only reason this is happening even is because of the threat of the proxy fight," Pivotal Research analyst Brian Wieser said.

Yahoo said the newly formed committee and its advisers are working on a process for reaching out to and engaging with potentially interested strategic and financial parties.

Earlier this month, Yahoo dealt with interested parties individually, without running a formal auction process, according to people familiar with the matter.

Yahoo announced this month it was considering strategic alternatives for its core Internet business, after shelving previous plans to spin off its stake in ecommerce giant Alibaba Group Holding Ltd.

"Separating our Alibaba stake from Yahoo's operating business is essential to maximizing value for our shareholders," Mayer said on Friday.

Starboard was not immediately available for comment.

"I think a proxy fight would be the right thing to do," said investor SpringOwl Asset Management's Managing Director Eric Jackson.
Yahoo's board is concerned about the risk of losing a possible proxy contest, he said.

The committee has engaged Goldman Sachs & Co Inc, J.P. Morgan and PJT Partners Inc as financial advisers, and Cravath, Swaine & Moore LLP as legal adviser.

Verizon Communications Inc is among the companies seen as a potential buyer of Yahoo's core business.

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