The pot is starting to stir up more vigorously and AOL, Inc. (NYSE:AOL) is the main ingredient of this soup as Starboard Value was revealed to have significantly increased its ownership in the company during the third quarter. Bloomberg‘s Emily Chang reported the news.
“[…] Activist hedge fund Starboard Value has acquired a new stake in AOL. The move comes as the company continues to campaign for changes in Yahoo, including the possible combo with AOL. According to a filing today with the SEC, the fund bought 1.92 million shares, or about 2.4 percent of AOL during the third quarter,” said Chang.
Whether it’s the fault of AOL, Inc. (NYSE:AOL)’s CEO, Timothy Armstrong, or just the extremely competitive environment in the internet sphere, AOL is not exactly a thriving business. On the other hand Yahoo is another business operating in the same sector that has problems getting any sort of valuation for its core operations. The valuation of Yahoo is almost entirely rooted in the stake that the company has in Alibaba and Yahoo Japan.
Starboard Value had sent a letter to the Yahoo board explaining how the company could benefit from a possible merger deal with AOL, Inc. (NYSE:AOL). No steps directed towards this outcome have come into light though. However, perhaps synergies and cost efficiencies arising out of some sort of a merger could go a long way in helping the two ailing businesses.
AOL, Inc. (NYSE:AOL)’s weak points include the dial-up ISP, which saw a decline and a nearly stagnant display ad-revenue according to the company’s latest Earnings Release. The company’s third party platform ad-sales is one of the areas where growth was seen.
The merger proposal is not free of complications as well. There would of course be the big question of who acquires who and who is going to run the show for the new company. If you compare market caps AOL, Inc. (NYSE:AOL) is a much smaller company with $3.59 in market capitalization, as compared to Yahoo’s market cap of around $49 billion. However, Armstrong doesn’t look like the man who would be willing to lose control of his company.
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