Activist investor Starboard Value has once again placed pressure on Yahoo CEO Marissa Meyer, urging her to stop spending money on large acquisitions and combine instead with AOL.

In a letter sent by Starboard managing member Jeffrey C. Smith, which was made public by Yahoo, Smith says Starboard has become "increasingly concerned" about the growing number of media reports that Yahoo was considering an acquisition of media outlets Scripps Networks Interactive, which owns popular lifestyle networks such as HGTV, Food Network, DIY Network, Travel Channel and Cooking Channel, and Time Warner's CNN.

"Our concerns that these media reports may have some truth are exacerbated as it has now been more than 60 days since the IPO of Alibaba, and Yahoo is now free to disclose its intentions with regard to its shares of Alibaba," Smith says.

Smith further suggests that Yahoo must consider a merger with web portal AOL, a recommendation that Starboard has made not for the first time. It is clear why Starboard is pushing for a Yahoo-AOL merger. While the investor owns less than a 1 percent stake in Yahoo, it owns a 2.4 percent stake in AOL.

"We continue to believe that Yahoo must significantly reduce costs to improve profitability in its core business and should be considering a combination with AOL," says Smith.

The Starboard chief says a merger of the two web portals, if structured properly, will provide "tremendous cost synergies" between $1 billion and $1.5 billion while opening a new platform for Yahoo via AOL's growing mobile and video advertising business. He further believes such a merger could allow for a "tax-efficient separation of the non-core minority equity investments."

Earlier this week, Bloomberg reported that Verizon is considering an acquisition of AOL, but Verizon CEO Lowell McAdam said his company is more interested in joint ventures. AOL CEO Tim Armstrong also said in the past that he would not entertain proposals to merge with Yahoo.

Smith also says that Starboard opposes Yahoo's considering a cash-rich split-off of its shares in Alibaba and Yahoo Japan, which he says is "clearly inferior to a spin-off structure" that is more tax-efficient and investor-friendly. He says he had spoken to larger shareholders who share Starboard's view that Yahoo must conduct spin-offs of Alibaba and Yahoo Japan.

Chinese e-commerce website Alibaba's initial public offering in November last year earned for Yahoo a $9 billion cash bundle after selling some of the 24 percent of stocks it owned in the company. To date, Yahoo has not yet disclosed what it plans to do with the remaining 15 percent stake it has in Alibaba, a point that has become a piece of contention with Yahoo's shareholders.

Smith closes his letter with a threat to oust Mayer should she not heed Starboard's recommendations.

"Should you instead choose to proceed down a different path by pursuing large acquisitions and/or a cash-rich split, both of which have been speculated, such actions would be a clear indication to us that significant leadership change is required at Yahoo," Smith warns.

Yahoo has not publicly responded to the letter. Mayer previously said she will disclose more of Yahoo's plans at the upcoming earnings report in January. She also said that Yahoo has hired tax experts who are tasked to come up with "promising" options that will help lower taxes when the remaining Alibaba stake is sold.

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