AOL Wins Proxy Contest As Shareholders Re-Elect Board
06/14/2012| 09:53am US/Eastern
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By William Launder and Jon Kamp
AOL Inc. (>> AOL, Inc.) Thursday appeared to win a proxy fight with activist investor Starboard Value, relieving some of the scrutiny on Chief Executive Tim Armstrong's investments in online content businesses like Patch.com and The Huffington Post.
A majority of shareholders at AOL's annual meeting voted to re-elect all eight of AOL's current board members, rather than take on any of the three candidates proposed by activist shareholder Starboard value, according to a preliminary estimate by AOL. A final count of shareholder votes is expected later Thursday.
The company thanked shareholders for their support and said it plans to respond "to the messages we heard from our investors." AOL added that it has "the right strategy and team" to continue providing value for its shareholders.
Starboard, which owns around 5.3% of AOL's outstanding shares, had nominated Chief Executive Jeffrey Smith and two other candidates as part of ongoing efforts to gain influence over the Internet company's online content businesses and other strategic decisions.
AOL and Starboard have for months traded blows over AOL's strategy, with Starboard taking particular aim at AOL's network of money-losing local news websites, Patch.com.
Mr. Armstrong has starkly defended his content investments as part of broader efforts to transform AOL into an advertising-revenue driven media company, following its spin-off from Time Warner Inc. (TWX). He says AOL units like Patch, which he founded, need more time to become profitable.
In April, AOL announced a $1.06 billion deal to sell and license its patent portfolio to Microsoft Corp. (>> Microsoft Corporation), a deal that both AOL and Starboard have taken credit for initiating.
Starboard's Smith spoke briefly at the meeting, saying that shareholders and management agree that the company is undervalued and can achieve "substantial revenue growth and far more profitability."
But the challenge is how to get there, he said. Mr. Smith credited AOL for making improvements, but also said they are "not enough." He also credited his firm for contributing to AOL's progress.
"AOL is a terrific company with wonderful assets and brands," Mr. Smith said. "The company should be more highly valued."
Two of the most influential proxy advisory firms, Institutional Shareholder Services and Glass Lewis, had endorsed Mr. Smith as a candidate for the AOL board, but they had mixed views on the other candidates proposed by Starboard.
AOL shares slid 1.5% in early trading to $26.70.
Write to William Launder at william.launder@dowjones.com and Jon Kamp at jon.kamp@dowjones.com
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