Updated with details from SEC filing: Yahoo struck a truce today with activist investor Starboard Value, one of its most vigorous critics, by agreeing to add four of its candidates to the board. As a result of the deal, Starboard withdrew its effort to replace the entire board.
Starboard picked its CEO Jeffrey Smith as well as former Tribune CEO Eddy Hartenstein, former Deutsche Bank Securities M&A specialist Tor Braham, and Tessera Technologies chairman Richard Hill. Smith joins the Strategic Review Committee, which is weighing offers to buy all or part of the Internet company. Hartenstein will be on the Compensation Committee while Braham joins the Audit and Finance Committee and Hill serves on the Nominating and Corporate Governance Committee.
Yahoo CEO Declines To Discuss Sale Plans To Protect
The terms require Starboard to own at least 1% of Yahoo shares. It currently has 1.7%.
Yahoo will end up with 11 directors. Two current ones — Lee Scott and Sue James — are not standing for re-election. Although they’ll remain until the annual shareholders’ meeting, they’ve relinquished their committee assignments. The company agreed to hold the meeting by June 30.
In addition, both sides agreed not to disparage each other. Yahoo will pay Starboard up to $2 million for its “reasonable and documented out-of-pocket fees and expenses (including legal expenses).” Yahoo says in an SEC filing.
Yahoo shares are down about 1.1% in morning trading.
Smith says that he and his colleagues “look forward to getting started right away and working closely with management and our fellow board members with the common goal of maximizing value for all shareholders.”
The target of much of his wrath about Yahoo’s disappointing performance, CEO Marissa Mayer, calls this a “constructive resolution [that] will allow management and the board to keep our focus on our extremely important objectives. Management is looking forward to working with the entire board, including the new directors, to maximize shareholder value.”
Chairman Maynard Webb praised the newcomers as “highly respected, independent directors” who will “bring valuable experience and perspectives to Yahoo during this important time for our company.”
They were singing a different tune last month. In a letter to Yahoo shareholders, Smith said he was “extremely disappointed with Yahoo’s dismal financial performance, poor management execution, egregious compensation and hiring practices and the general lack of accountability and oversight by the Board.”
He wanted to replace the entire board while Yahoo considers offers, saying that his picks “would provide much-needed credibility to a process that has been publicly criticized for being too slow, fraught with conflicts of interest, and very difficult for highly qualified and motivated strategic and financial buyers to access much needed diligence information,”
Last week, Yahoo reported that in Q1 it generated a net loss of $99.2 million versus a net gain of $21.2 million in the period last year, on revenues of $1.09 billion, down 11.3%.
Smith said earlier this month he was open to a deal that would assure him of some board seats.
Yahoo has had little to show since Mayer took charge in 2012, aiming to revive its status as a Silicon Valley icon. She sought to beef up the company with deals including a $1 billion acquisition of Tumblr and $650 million for BrightRoll.
She also built media properties around brand-name talent including Katie Couric and former New York Times consumer electronics critic David Pogue. The company produced longform TV shows including Sin City Saints, Other Space and Season 6 of Community, but in October said it had to take a $42 million write-down on them.
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