Starboard Value is a hedge fund on the prowl.
On Friday, less than 24 hours after receiving key proxy endorsements in its longstanding quest to oust the board at Darden Restaurants, the activist investor sank its teeth into Yahoo!
And it's not likely to let go, a source told the Post, until the Marissa Mayer-led company succumbs to Starboard's recommendation that it merge with AOL.
Starboard managing director Jeff Smith laid out his plans in a 2,500-word letter to Mayer that, in addition to advising an AOL hook-up, recommends Yahoo! cut expenses, shake its acquisition habit and monetize its 15 percent stake in Alibaba and 35.5 percent stake in Yahoo! Japan.
Smith also let it be known — even though out of the office in observance of Rosh Hashanah — that his fund was already "a significant" Yahoo! shareholder.
"Yahoo!'s remaining stake in Alibaba is currently worth more than the entire enterprise value of Yahoo!," he wrote. With Yahoo! Japan thrown into the mix, Smith asserted Starboard's plan would goose Yahoo!'s stock by $11 per share.
Mayer said only that the company would review the letter.
News of Starboard's interest in Yahoo! sent its stock up 4.4 percent in Friday trading, to close at $40.66 per share. AOL shares also got a bump, rising 3.7 percent, to close at $44.55.
Part of AOL's rise can be attributed to Starboard's intimate knowledge of AOL — a company Smith believes could deliver up to $1 billion in synergies if combined with Yahoo!
Smith sent a letter to AOL in December 2011, similar to the one Yahoo! received on Friday. His AOL epistle kicked off a bruising battle that had Smith going mano a mano with AOL CEO Tim Armstrong for the next half year.
Although Armstrong finally escaped Starboard's clutches, he did so mostly by executing on the directives dispensed by Smith.
"Starboard got everything it wanted but the proxy vote," said a source close to that earlier battler.
Mayer has also managed to shut down another activist's campaign. She bought back the stake held by Third Point's Dan Loeb after he orchestrated her arrival as Yahoo! CEO in July 2012.
Starboard is expected to be more persistent.
"It's true they don't have a holding period set for any of their investments," says the source close to Starboard's struggle with AOL. "It would be unusual, though, for them to pump and dump. It's not their M.O."
This isn't the first time an AOL-Yahoo! combination has captured imaginations.
In July, at Allen & Co.'s annual mogulfest, Armstrong and Mayer sparked speculation of a tie-up by having a "deep conversation" late at night in a Sun Valley, Idaho, bar.
The cognoscenti eventually determined such a merger was a no-go — AOL wasn't cool enough for glamorous Mayer, sniffed one investor at the time — but Mayer's coolness factor has since begun to fade.
"The idea isn't to create a great company [by merging Yahoo! and AOL]. It's to create a better company," said a source familiar with Starboard's current thinking.
And before this battle is over, he adds, investors will hear time and again how if Yahoo! and AOL are left to themselves "they will ultimately struggle."
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