Tomahawk, WI 10/03/2014 (Basicsmedia) – Ailing search engine giant Yahoo! Inc. (NASDAQ:YHOO) could enjoy a new lease of life should it pay attention to Activist investor Starboard Value’s advice and merge with AOL, Inc. (NYSE:AOL). CNBC’s Digital Senior Writer John Jannarone believes that such a merger would be beneficial for the two companies in terms of cost saving synergies of up to $16 billion in tax bills.

Starboard, which acquired stakes in Yahoo! Inc. (NASDAQ:YHOO) is pushing for a number initiatives that it believes will help in slashing costs in Yahoo’s ailing advertising unit. Yahoo’s acquisition strategy also continues to raise ripples with the investors’ community as it has not lived up to expectations, in terms of returns.

“[…] What they want to do is take the core Yahoo out of Yahoo and what’s left would be the Alibaba Group Holding Ltd (NYSE:BABA) stake and Yahoo Japan stake. This is a pretty elegant solution to a couple of issues; one is the tax issue off course. Starboard’s estimates in a letter they put out last week that they would save $16 billion in taxes if they can do this, so that is a massive amount of money,” said Mr. Jannarone

Starboard believes that a merger between AOL and Yahoo! Inc. (NASDAQ:YHOO) will result in cost saving synergies for the two companies on the advertising side of the business. Jannarone argues that AOL, Inc. (NYSE:AOL) would agree to a merger as both will combine forces to remain Competitive in Digital advertising.

“[…] I think they would probably be interested in this; they get a lot of scale and my guess is that Starboard will probably want to put AOL management in charge. […] I think that starboard probably is pretty happy with AOL’s management right now so I can see it happening, it will be friendly,” said Mr. Jannarone.

It is still unclear whether Yahoo! Inc. (NASDAQ:YHOO) will agree to AOL, Inc. (NYSE:AOL) controlling the combined company.

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