Starboard Urges Yahoo To Monetize Assets, Buyback $4 Bln. Shares

(RTTNews) - Starboard Value LP on Monday urged Yahoo! Inc (YHOO) to buyback $4 billion of its stock, monetize assets and cut costs as part of a broader plan to enhance shareholder value. The hedge fund said the tax-free spin-off of Yahoo's Alibaba stake while being a first good step, is not sufficient to boost valuation.

In a communique to Yahoo CEO Marissa Mayer, Starboard, said to own 0.8 percent of Yahoo, said the search engine company is in need of a major overhaul. "It is time for management and the Board to take a holistic view of the company's challenges and opportunities, and develop a comprehensive plan to maximize shareholder value."

Starboard believes certain changes can unlock $11.1 billion of shareholder value or $11.70 per Yahoo share.

The hedge fund believes Yahoo can license its intellectual property portfolio and monetize all or part of its real estate assets. These would in aggregate fetch $1.7 billion or $1.80 per Yahoo share in excess capital that Yahoo should return to shareholders, the firm said.

Starboard also was supportive of Yahoo's desire to monetize the Yahoo! Japan stake. It believes a tax efficient separation of this asset can create $2.6 billion to $3.1 billion of value.

The hedge fund also said Yahoo could cut costs by $570 million annually.

Starboard said there is no reason for Yahoo to hold more than $5 billion in cash, which ideally should be returned to shareholders.

Therefore, Starboard believes that Yahoo should return an additional $3.5 billion to $4 billion of cash to shareholders through share repurchases.

In January, Yahoo revealed plans to spin off its remaining stake in Chinese e-commerce company Alibaba Group (BABA), valued at about $40 billion, bowing to pressure that shareholders partake the priced investment.

Starboard believes Yahoo is deeply undervalued and that the announcement of the spin-off of Yahoo's stake in Alibaba into a new entity has made it an even more compelling investment opportunity.

This is not the first time Starboard has urged Yahoo to boost shareholder value. The private equity company had earlier suggested Yahoo consider a merger with AOL.

YHOO is trading at $42.85, down $0.59 or 1.36%, on a volume of 5.5 million shares on the Nasdaq.