The rebellious shareholder, Starboard Value to get four seats on Yahoo's board.
Yahoo has reached a truce with an activist investor threatening to oust CEO Marissa Mayer and the rest of its board, removing a major distraction as the company evaluates bids to buy its Internet operations.
The agreement announced on Wednesday will give the rebellious shareholder, Starboard Value, four seats on Yahoo's board. The company is diluting Starboard's voting power, though, by expanding its board from nine to 11 directors.
Although Starboard won't be able to exert control over the process, it will have a seat at the negotiating table as Yahoo talks to suitors interested in snapping up its email, advertising tools and other digital services, including widely read sports and finance sections.
As one of Yahoo's newly appointed directors, Starboard CEO Jeffrey Smith will become part of a special committee assessing the bids along with two incumbent directors, Tom McInerney and Eric Brandt.
"Now, Starboard will be able to see if there are compelling bids that should be pursued, or if the bids look too low," said Mizuho Securities analyst Neil Doshi.
Yahoo Inc. has declined to provide details about the auction since announcing its intent to explore a possible sale two months ago.
Analysts have estimated its Internet operations could fetch anywhere from $4 billion to $10 billion, with most investors now betting that any sale would come at the high end of that range.
Verizon Communications, which last year bought AOL Inc. for $4.4 billion, has publicly declared its interest in adding Yahoo to its portfolio and is widely considered to be the most likely buyer.
Smith began pushing Yahoo to combine its operations with AOL in 2014.
A decision on whether Yahoo will sell or retain its Internet operations is expected to be reached before the company's annual meeting, which is typically held in late June. It hasn't yet announced the date of this year's gathering.
Yahoo's stock shed 41 cents to $36.70 in Wednesday's afternoon trading.
Mayer and Yahoo's board have been under mounting pressure to make dramatic changes because the company has been struggling for years to sell more digital advertising, despite marketers shifting more of their budgets in that direction.
Most of that money has been flowing to Google and Facebook, at the same time Yahoo is facing new threats from popular messaging apps such as Snapchat.
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