Battle for Control of America Online Heats Up, Patch News Caught in the Crossfire
America Online, once America’s most popular online service, is engaged in a battle for survival after their largest shareholder, Starboard Value, LP declared they are going to make a move to take over the board of directors of the company. In the cross hairs of the battle lies Patch, an AOL service that provides the company’s corporate brand of “hyperlocal” media to over 800 towns and cities nationwide.
This week, Glass Lewis, a proxy advisory service became the third voice to counter Starboard’s call to immediately shut down the Patch news service, but announced their support for two of Starboard’s nominees. That declaration of support, prompted AOL to slam Glass Lewis.
Support for Starboard LP’s nominees has been growing just days before the June 14th annual shareholders’ meeting for America Online. Depending upon the outcome of this election, Patch’s future seems uncertain.
AOL published a letter in response, touting their handpicked nominees for the company’s board of directors, claiming Glass Lewis’ decision to not support all of Starboard’s nominees is proof that they are right. ”The Glass Lewis rejection of Starboard’s full slate reinforces our belief that our director nominees have the qualifications necessary to most effectively lead AOL and to further enhance stockholder value.” the company said in a statement. ”However, we believe that Glass Lewis’s recommendation is flawed and we are disappointed that Glass Lewis has recommended stockholders vote for Jeffrey Smith, a Starboard nominee who has no new media experience. The AOL management team and Board have reached out to Mr. Smith numerous times to engage in a constructive board-level dialogue; however, Starboard has refused AOL’s numerous requests to reach a mutually agreed upon outcome that benefits ALL stockholders.”
AOL then, in the letter, urged investors to maintain the line in the election. ”Our Board, which includes eight highly qualified director nominees, has implemented a clear and consistent pattern of bold actions to deliver stockholder value. The Board has proven that it can drive value in the short-term while executing on a strategy that we believe will produce even greater long-term value. Furthermore, the Board has committed to adding two new Board members, which we believe will add fresh, relevant perspectives and further enhance stockholder value. At the same time, the Board is committed to managing all its investments with strict discipline and will only invest in it if we continue to see positive signs of consumer growth, engagement and ultimately, profitability. We strongly urge stockholders to maximize the full value of their investment by supporting the AOL Board’s vision for long-term success and by voting FOR all of AOL’s director nominees on the WHITE proxy card today.”
The AOL Patch service operates in 800 communities, including several in Ocean County, including Toms River, Brick, Lacey and Manchester. A Starboard majority win could jeopardize the future of the service. Whether Starboard wins or AOL’s existing board can shake off a takeover, investors worldwide will still be left wondering how the company intends to make up for the losses incurred in AOL’s reported $180,000,000 investment into Patch which has reportedly seen very little financial returns in their display advertising business.
Since starting in 2011 in Toms River, AOL has made several announcements to cuts in the Patch program including sales representatives, cuts to freelance budgets and the company has had a mass exodus of executive level managers and directors over the past twelve months.