Activist investor Starboard Value LP announced on Friday that it has acquired a major stake in Yahoo! Inc. (NASDAQ:YHOO) and the fund wrote a letter to the CEO, Melissa Mayer, of Yahoo suggesting a merger with AOL, Inc. (NYSE:AOL).

Starboards Value LP emphasized that Yahoo! Inc. (NASDAQ:YHOO) should monetize its Asian assets including Yahoo Japan and Alibaba Group Holding Ltd (NYSE:BABA)’s holding to offer better returns to its shareholders. Its first suggestion includes a merger with AOL, Inc. (NYSE:AOL)

“Exploring a strategic combination with AOL, Inc. – a company we know well – which could improve Yahoo’s competitive position, deliver cost synergies of up to $1 billion, and potentially facilitate the realization of value from Yahoo’s non-core equity stakes with minimal tax leakage.”

This is not the first time that Starboards Value LP has engaged itself in AOL, Inc. (NYSE:AOL), as the activist investor acquired stakes in AOL 2 years ago and had an unsuccessful attempt on gaining boards seats.

Starboards Value LP mentioned some potential opportunities including “Unlocking the substantial value from Yahoo’s non-core minority equity stakes in Alibaba Group Holding Limited (“Alibaba”) and Yahoo Japan in a structure that delivers value directly to Yahoo shareholders in a tax-efficient manner.”

Starboards Value LP said that Yahoo! Inc. (NASDAQ:YHOO) is not taking full measures to save tax money out of its sales of Alibaba Group Holding Ltd (NYSE:BABA)’s shares. The fund further suggested that efficient tax structure could help Yahoo generate additional $16 billion out of its Asian stakes. Further, Starboard Value LP said to have explored several

“alternative structures” to deliver direct benefits to the shareholder while ensuring “minimal tax leakage.”

Merissa Mayer later said that Yahoo! Inc (NASDAQ:YHOO) would review the suggestions and respond accordingly.

This article has been written by Prakash Pandey.