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Yahoo Board Battle Is On: Activist Investor Starboard Nominates 9 Directors

Yahoo, currently looking for a potential buyer while also paring back parts of its business, now officially faces a fight for control of its board of directors.

Starboard Value, which owns about 1.7% of Yahoo’s outstanding shares and has been vocal about its displeasure with CEO Marissa Mayer’s performance, announced Thursday that it is nominating nine candidates for election to Yahoo’s board — seeking to unseat Mayer and the other current directors.

The New York hedge fund’s nominees include its own CEO, Jeffrey Smith; Bridget Baker, formerly NBCUniversal’s president of TV networks distribution; and Eddy Hartenstein, former CEO of DirecTV, Tribune Co. and Los Angeles Times Media Group. The directors will be nominated for election at Yahoo’s annual shareholders meeting in late June. Starboard had previously announced intentions to put up a slate of board candidates.

Earlier this month, Yahoo appointed two directors to its board, to bring it to nine members: Catherine Friedman, former managing director of Morgan Stanley, and Eric Brandt, former CFO of Broadcom.

In an open letter to Yahoo shareholders, released Thursday, Smith reiterated his firm’s belief that the Internet company is “deeply undervalued.”

“We believe the board clearly lacks the leadership, objectivity and perspective needed to make decisions that are in the best interests of shareholders,” he wrote. Starboard’s board candidates are “prepared to serve the shareholders of Yahoo and ensure that the interests of all shareholders are of paramount importance.”

According to Starboard, it evaluated more than 100 potential board candidates before selecting the nine-member slate. The full letter is available on Starboard’s website.

Yahoo said in a statement, “The board’s nominating and governance committee will review Starboard’s proposed director nominees and respond in due course.”

“It is unfortunate that this action is necessary,” Smith wrote in the letter. In the last 18 months, “We have repeatedly requested an opportunity to work with the company, including offers to join the board and work constructively with the current directors. At every step of the way, management and the board have pushed us away.”

The Starboard nominees are:

  • Bridget Baker, longtime NBCU exec who was its first president of TV networks distribution, who currently serves as a director of General Communication, Alaska’s largest telecommunications company;
  • Tor Braham, former Deutsche Bank Securities managing director and global head of technology mergers and acquisitions, who currently serves on the boards of NetApp, Viavi Solutions and Sigma Designs;
  • Brad Buss, former CFO of SolarCity and Cypress Semiconductor, who currently serves as a director of Tesla Motors, CaféPress.com and Advance Auto Parts;
  • W. Lance Conn, former president of Paul Allen’s Vulcan Capital and senior AOL exec, who is a director of Charter Communications;
  • Dale Fuller, former CEO of moka5 and Borland Software, currently on the boards of AVG Technologies, Quantum and tech startup MobiSocial;
  • Eddy Hartenstein, former CEO of Tribune Co., chairman and CEO of DirecTV and publisher and CEO of the Los Angeles Times Media Group, who currently serves as a director of SanDisk, Sirius XM Holdings, Broadcom and Rovi;
  • Richard (Rick) Hill, former chairman of Tessera Technologies and CEO of Novellus Systems, who currently serves as a director of Arrow Electronics, Cabot Microelectronics Corporation and Autodesk;
  • Debra Janssen, currently COO of regional bank Bankers Trust; and
  • Jeffrey Smith, managing member, CEO and chief investment officer of Starboard Value, who is a director and chairman of Darden Restaurants and serves on the board of Advance Auto Parts.

Yahoo’s current board comprises chairman Maynard Webb Jr., founder of Webb Investment Network;
Marissa Mayer; Catherine Friedman; Eric Brandt; Yahoo co-founder David Filo; Sue James, former partner at Ernst & Young; Thomas McInerney, former CFO of IAC/InterActiveCorp; H. Lee Scott Jr., former CEO of Wal-Mart Stores; and Jane Shaw, former chairman of Intel.

The company named Friedman and Brandt to the board following the resignations of Charles Schwab, chairman of the Charles Schwab Corp., and PayPal co-founder Max Levchin.

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