AOL Inc. shareholder Starboard Value LP nominated five directors for the web portal’s board after citing disappointment in the company’s response to an earlier letter saying it should move to stem shareholder losses.
Starboard, which increased its stake to 5.2 percent from 4.5 percent late last year, said it’s “increasingly uncomfortable” with the direction the company and the board leadership are taking, according to a statement Friday. The new slate of directors, which includes Jeffrey Smith, co-founder and Chief Executive Officer of Starboard, will ensure AOL evaluates with an “open mind and a keen sense of urgency” all alternative strategies.
AOL CEO Tim Armstrong has been struggling to revive revenue growth after separating from Time Warner Inc. in December 2009, as the company competes for advertising dollars with Google Inc. and Facebook Inc. While AOL increased display-ad sales in the fourth quarter, total revenue fell 3 percent and net income dropped 66 percent.
“We are troubled that the company remains closed-minded to alternative value creation initiatives, and instead appears solely focused on pursuing the status quo,” Starboard said in a statement. “AOL is a diverse company with tremendous assets in a variety of different businesses that collectively are being undervalued in the marketplace.”
Starboard also nominated Ronald Epstein, CEO of intellectual property firm Epicenter IP Group LLC; Steven Fink, a private investor; Dennis Miller, a “strategic” adviser to Lionsgate Entertainment; and James Warner, the principal of advisory firm Third Floor Enterprises, a company specializing in digital marketing and media.
Starboard said it plans to propose the new directors at AOL’s annual meeting, which the company said is scheduled for some time in May.
AOL has held “several meetings” with Starboard giving them an opportunity to “help shape” the board’s composition and size, according to a separate statement. “Unfortunately, Starboard Value LP has a singularly focused agenda and rejected this productive path to address their stated concerns and drive increased shareholder value,” AOL said. “Our board of directors and management team remain firmly committed to creating value for all shareholders.”
AOL, based in New York, fell 1.2 percent to $18.22 at 3:01 p.m. New York time. Before Friday, the shares dropped 13 percent in the last 12 months.
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