Yahoo’s Mayer may turn to private-equity firms to save her job

Yahoo CEO Marissa Mayer walks off the stage after delivering the keynote address Thursday, Feb. 18, 2016, at the Yahoo Mobile Developer Conference in San Francisco. (AP Photo/Eric Risberg) Yahoo CEO Marissa Mayer walks off the stage after delivering the keynote address Thursday, Feb. 18, 2016, at the Yahoo Mobile Developer Conference in San Francisco. (AP Photo/Eric Risberg) Photo: Eric Risberg, Associated Press Photo: Eric Risberg, Associated Press Image 1 of / 1 Caption Close Yahoo’s Mayer may turn to private-equity firms to save her job 1 / 1 Back to Gallery

Embattled Yahoo CEO Marissa Mayer may be exploring a deal to take the business private in order to stay at its helm, even as her board weighs a sale of the struggling search giant to telecommunications companies.

Mayer’s friend, investment banker Frank Quattrone, has contacted private-equity firms on Mayer’s behalf to explore a potential deal for Yahoo’s core business, according to a person familiar with the matter, who asked not to be named because he was not authorized to speak on the issue. The news was first reported by Fortune and confirmed by The Chronicle.

Mayer’s move could indicate that she is pursuing her own strategy — one different from the board’s — in an effort to save her job, analysts said. Activist investors, meanwhile, are pushing the board to oust the CEO.

“She wants to finish the job that she feels that she started,” said Eric Jackson, a managing director of SpringOwl Asset Management LLC, one of the investors that wants Mayer out. “You can either admire that, or look at that as she’s already had plenty of time to show her stuff and it just hasn’t materialized.”

Yahoo declined to comment. Last week, the company said it would set up a formal process to engage with potential buyers. A committee of independent directors would evaluate such offers and make recommendations to the board.

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Mayer is not part of that committee, and has been implementing a turnaround plan announced in February that would focus on fewer products with a leaner staff.

Under Mayer’s leadership, Yahoo has boosted revenue in mobile, video, social and native advertising, generating nearly $1.7 billion in that category last year. But despite that growth, analysts say Yahoo’s core business has deteriorated since 2012—the year Mayer joined Yahoo.

The board and Mayer have said they support each other, but some analysts are skeptical.

Neil Doshi, an analyst at Mizuho Securities USA Inc., said Yahoo’s board “seems at odds” with Mayer. He believes the better deal for shareholders would be for a strategic buyer such as Comcast, Verizon or AT&T — and not a private-equity firm — to take over Yahoo’s core business. Strategic buyers, he said, are likely to pay more.

“This rift could be exacerbated if the board gets compelling offers that Ms. Mayer is not willing to accept,” Doshi wrote in a note to investors.

Investment bank SunTrust Robinson Humphrey estimates that Yahoo’s core business, including its real estate, could fetch $6 billion to $8 billion from a strategic buyer, compared with $4 billion to $6 billion from a private equity firm.

The story of Yahoo has become a drawn-out saga, pitting Silicon Valley entrepreneurial optimism against the harsh financial perspective of Wall Street investors. Those who have worked with Mayer say she’s not one to back down from a challenge.

“I think she has great optimism and great intelligence,” one former Yahoo executive who declined to be named told The Chronicle in January. “She doesn’t think she’s failing.”

Starboard Value, a New York hedge fund, is expected to engage in a proxy battle with Yahoo, nominating its own slate of board candidates. Starboard has until March 26 to file its nomination notice. If Starboard files its slate, SpringOwl said it will probably support those nominees.

The winner of the proxy contest will be determined by the majority of shareholders at Yahoo’s annual meeting this summer.

Whether Mayer remains head of Yahoo or not does not really matter to investors, as long as the core business is sold, analysts said.

“At that point, that really wouldn’t be the investors’ problem,” said Robert Peck, an analyst with SunTrust Robinson Humphrey. “They are looking for the highest bidder and, particularly, the quickest transaction.”

Wendy Lee is a San Francisco Chronicle staff writer. Email: wlee@sfchronicle.com Twitter: @thewendylee