“The focus in the meeting has gone from a year ago of being around the fundamentals to now being how could you carve this up, what are separate assets worth, are there ways to sell off the business to extract value from them,” said a top 20 AOL shareholder who attended one of the meetings.
Armstrong told the investors that a merger between AOL and Yahoo could see $1 billion to $1.5 billion in savings from overlapping data centers and duplicate news sites, such as sports, entertainment and finance, another major shareholder who met with Armstrong said.
He is pushing the notion that a combination with Yahoo would appease ad agencies looking for more efficient buys with a bigger audience, said the two shareholders.
AOL declined comment for this story.
Armstrong, a former Google top executive, could use a deal to bow out of AOL gracefully – or look to run a combined company, Reuters said.
“As far as Armstrong’s desire for an exit, he doesn’t want to be doing what he is doing 18 months from now. He wants to be out,” Reuters quoted a source familiar with Armstrong’s thinking as saying.
“He’s an ambitious sort of guy and AOL is such an afterthought. But he would definitely put his hat in the ring to run a combined Yahoo/AOL.”
AOL, Yahoo and Microsoft in mid-September formed an advertising partnership to go up against Google, according to All Things Digital blog.
AOL’s stock has dropped more than 40 percent since it was separated from Time Warner in 2009. Recent weakness was driven by AOL’s quarterly earnings report in August that included management commentary that disappointed investors.
After the results, some investors said their patience with Armstrong’s turnaround strategy was wearing thin.
Recruited to AOL for his advertising sales prowess, Armstrong wants to turn the company into one of the top media destinations dependent on ad revenue, after a disastrous 10 year merger with Time Warner Inc.
Although Armstrong’s performance has disappointed many shareholders, some are not ready yet to pitch him overboard.
“He’s in the sixth inning,” said the top 20 AOL shareholder. “It is not fair to grade him right now but I think the investment community is a little put off. There is a strong desire to see tangible results.
AOL’s stock on Wednesday closed down slightly at $13.15, giving the company a market value of $1.4 billion. Yahoo shares also closed down slightly at $15.77, giving the firm a market capitalization of $19.9 billion.
Yahoo and AOL have many common shareholders as of June 30, including Capital Research, BlackRock, Vanguard and State Street.
Fidelity Management and Research Co, AOL’s No. 2 shareholder as of June 30, cut its stake in AOL to 3.7 percent from 10.3 percent according to a regulatory filing Tuesday. [via Reuters, Fox Business and The Hollywood Reporter]