Dan Loeb’s Third Point LLC, which two years ago agitated for Yahoo! Inc.’s board to resign, made $655 million today when the Internet company bought back 40 million of his shares.
Yahoo, which is based in Sunnyvale, California, is paying Loeb $29.11 a share, leaving his hedge fund with a 129 percent return on its initial stake. That doesn’t include gains on the 20 million shares Third Point still owns or on shares he previously sold. Loeb and two other directors he brought to the board, Harry Wilson and Michael Wolf, will leave.
“Harry, Michael and I are pleased to have played key roles in Yahoo’s resurgence since we joined the board last spring,” Loeb said today in a statement. “Since our board’s rigorous search led us to hire Marissa Mayer as CEO, Yahoo’s stock price has nearly doubled, delivering significant value for shareholders.”
The success at Yahoo comes as Loeb agitates for a breakup of Sony Corp. in Japan, seeking change in a country where few U.S. investors have succeeded with that approach. Sony American depositary receipts have gained 20 percent since Loeb, in a May 14 letter, urged the Tokyo-based company to sell as much as 20 percent of its entertainment business in an initial public offering.
Third Point returned 12.6 percent in the first half of the year, among the better performers in the hedge-fund industry, which on average returned 3.6 percent, according to Hedge Fund Research Inc. Aside from Yahoo, his top performers in the first quarter were bets on Japanese equities and the yen, and long positions in American International Group Inc., Virgin Media and Herbalife Ltd. (HLF:US), according to his first quarter letter to investors.
Loeb reported owning (YHOO:US) 5.2 percent of Yahoo in September 2011, when he urged the board to resign, saying directors erred in spurning a $44 billion takeover bid by Microsoft Corp. and hired a chief executive officer who wasn’t up for the job. At that time, he had purchased about 45 million shares at an average price of $12.72.
He became a director in May 2012 in a board shakeup tied to the ouster of former Yahoo Chief Executive Officer Scott Thompson over a failure to correct errors in his credentials. Third Point had been locked in a dispute with Yahoo (YHOO:US) about its management, faulting Thompson for cutting jobs before he articulated a complete turnaround strategy after the company failed to accept the Microsoft bid.
At that time, Loeb had built his stake to 70.5 million shares. Third Point still owns 20 million shares, or about 1.8 percent, in Yahoo after the stake sale announced today, valued at about $564 million.
At Sony, Loeb is pushing for talks with company directors and investment bankers advising the electronics maker on his proposal after the board agreed to consider it. Sony CEO Kazuo Hirai has emphasized the need to fix the business that makes TVs, phones and laptops, while the Sony board is reviewing Loeb’s proposal.
Third Point increased its stake in Sony last month. Its funds own 70 million shares through direct ownership and cash-settled swaps, according to a June 17 letter from the investor to Hirai obtained by Bloomberg News. That equals about 6.9 percent of the Tokyo-based company’s shares on issue.
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