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January 28, 2016updated 30 Aug 2016 3:15pm

Investor urges Yahoo, Viacom to take on Warren Buffet-like partners

News: SpringOwl Asset Management owns undisclosed interests in both the firms.

By CBR Staff Writer

A Yahoo and Viacom investor has urged the boards of both firms to look for outside investments from strategic partners to improve the stock value.

In an article reviewed by Reuters, SpringOwl Asset Management managing director Eric Jackson said the companies would benefit from outside investment, citing Warren Buffett’s 2008 $5bn investment in Goldman Sachs.

The news agency quoted Jackson as saying: "Although some shareholders of both Yahoo and Viacom think that a simple sale or break-up of both companies is the best way to create value for shareholders, we believe that both companies could benefit from their own version of the "Buffett Convert."

Jackson said that if an outside investor puts money into both firms, the stakes of investors could dilute, but they would still be in a good position as the worth of their shares would go up.

Activist shareholders are targeting Yahoo and Viacom in recent months. Yahoo has been struggling to revive its core online advertising business.

Some shareholders allege that the efforts taken by Yahoo Chief Executive Marissa Mayer to restore the businesses did not yield better results.

Viacom is also facing a lawsuit, which alleges that its executive chairman, Sumner Redstone, is incapacitated.

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Jackson suggested that Yahoo should move to Liberty Media, whose chairman John Malone is an expert at identifying tax efficiencies, or look to telecommunications firms such as Verizon or AT&T, which could also bring traffic to its properties.

He said Viacom may benefit from outside investment and insight from China’s Alibaba, Amazon or AMC Entertainment, while also previously suggesting a merger with AMC.

He added that Viacom-owned Paramount movie studio could become more valuable to investors if it secures investments from Google, Apple, Amazon, or Alibaba.

Earlier this month, Yahoo investor Canyon Capital urged the company to stop wasting money.

Canyon Capital said Yahoo’s board and management team have invested more than $3bn on acquisitions to which, depending on its stock price, the market appears to ascribe negative value.

Yahoo is also cutting its workforce amidst growing pressure from shareholders to improve profitability.

The company is planning to slash about 10% of its more than 10,000-strong workforce, with the media and platforms-technology groups, as well as its European operations, set to be targeted.

When Mayer took maternity leave, SpringOwl Asset Management proposed a new plan to cut the company’s workforce by 75% and oust Mayer.

Earlier this year, hedge fund investor Starboard Value wrote a letter to Yahoo’s board of directors, arguing that significant changes are needed to executive leadership.

 

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