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Activist Investor Prods Yahoo to Buy Rival AOL

Starboard letter to Yahoo by the numbers 1:58

Marissa Mayer, you've got mail. An activist investor sent a letter to the Yahoo CEO on Friday listing several opportunities to increase shareholder value and recommending that it merge with AOL. Starboard Value, which recently went after Darden for wasting money in its Olive Garden restaurants, said a tie-up between the two firms could "offer synergies of up to $1 billion" and reduce corporate overhead cost.

AOL shares jumped more than 6 percent after the news, while Yahoo rose around 3 percent. "[W]e believe a merger of AOL and Yahoo's core business may be one of the best ways to both fully seize the cost reduction opportunity and also to tax efficiently monetize Yahoo's noncore equity holdings," the letter said. Starboard said the deal could help the companies navigate the ongoing industry changes, such as the growth of programmatic advertising and migration to mobile. Mayer acknowledged the letter Friday evening. "As part of our regular evaluation of Yahoo's strategic initiatives to drive sustainable shareholder value, we will review Starboard's letter carefully and look forward to discussing it with them," she said, in a statement.

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-- CNBC.com staff