According to a new report, Starboard Value, which owns about 5 percent of AOL, is looking to replace some of the company's board members.
AOL's many properties.
(Credit: Huffington Post)If you ever run a declining Web company, be sure to keep one thing in mind: activist investors are waiting to pounce.
Just days after Yahoo activist shareholder Daniel Loeb proposed plans to take over four board seats, a new report from All Things Digital, citing sources, claims a fund called Starboard Value is planning to launch its own proxy war with AOL.
According to All Things Digital, Starboard Value, which owns about 5 percent of AOL, could propose an entirely new group of directors as early as today. Tomorrow is the last day for shareholders to nominate potential directors to the board.
Starboard's timing is impeccable. Whereas Loeb only hopes to secure four seats for his hand-picked directors, AOL's entire board is up for reelection this year, allowing Starboard to nominate eight new members to the governing body.
Although Starboard had been running under the radar for a while, it emerged in December with a letter to AOL CEO Tim Armstrong, criticizing him for the company's troubles. At the time, it didn't give any indication that it would be launching a proxy battle to take control of the board.
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"We strongly believe that AOL is deeply undervalued and that there are opportunities to substantially improve overall operating performance and valuation based on actions within the control of management and the Board," Starboard Managing Member Jeffrey C. Smith wrote to AOL at the time. "AOL's stock price has underperformed over almost any time period and we believe it is time for the Board to take immediate action to address the significant concerns highlighted in this letter."
It's not hard to see why shareholders might not be happy with AOL. In the last year, the company's shares have fallen nearly 13 percent to $18.25. Its acquisitions of TechCrunch and Huffington Post proved controversial, and left it with an embarrassing exodus of journalists, including TechCrunch founder Michael Arrington. From a financial perspective, shareholders have been disappointed by the company's declining revenue--down nearly $2 billion over the last four years--and inability to secure sizable profits.
The similarities between Yahoo and AOL are striking. Both companies were once prominent entities in the online world, but are now trying to adapt to the changing times. Both companies are also suffering through declining financial performances, and now, shareholders are trying to wrest control of their boards.
It's perhaps no surprise, then, that Reuters reported back in October that Armstrong was floating the idea of merging his company with Yahoo. Reuters' sources said the move could net the combined companies $1.5 billion in savings.
Neither AOL nor Starboard immediately responded to CNET's request for comment on the All Things Digital report.
Source: http://feedproxy.google.com/~r/cnet/tcoc/~3/5u22zP2lEQs/
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