Activist Hedge Fund TCI Builds Yahoo Stake

One of Europe's most aggressive activist hedge funds is building a stake in Yahoo (Hanover: YHO.HA - news) ! as the digital portal proceeds with a multibillion dollar auction of its core internet business.

Sky News has learnt that The Children's Investment Fund (TCI, which is headed by one of Britain's wealthiest men, has amassed a shareholding in Yahoo! valued at hundreds of millions of dollars.

Sources said that TCI executives discussed the fund's Yahoo! shareholding at an annual investor meeting held in London on Tuesday.

They added that the shares were being held as a passive investment and that TCI managers viewed Yahoo! as an undervalued stock.

TCI declined to comment on the size of its Yahoo! holding, but insiders said it was now "substantially larger" than a 1.5% stake disclosed by the internet giant at the end of March.

The appearance of TCI on Yahoo!'s register is intriguing because of its track record at agitating for radical boardroom and strategic changes at many of the companies in which it invests.

Its current holdings include the London Stock Exchange Group, where it is supporting efforts to forge a European markets infrastructure giant through a merger with Germany's Deutsche Boerse (LSE: 0H3T.L - news) .

It (Other OTC: ITGL - news) is also a big shareholder in Volkswagen (LSE: 0P6N.L - news) , where it has accused executives of presiding over a culture which fostered the German car giant's diesel emissions scandal.

TCI is led by Sir Chris Hohn, who founded the firm in 2004 and has since used a large part of the wealth he has accumulated to establish a major charitable foundation.

The outcome of efforts by Yahoo!'s embattled chief executive, Marissa Meyer, to engineer a sale of its core internet business remains unclear.

The Wall Street Journal reported on Monday that Verizon Communications (Xetra: 868402 - news) , the US-based telecoms group, would submit an offer worth around $3bn for the division.

A number of private equity firms have also been linked to the process, while the Daily Mail and General Trust acknowledged in April that it could participate in a joint offer for the Nasdaq (NasdaqGS: NDAQ - news) -listed internet group.

The bulk of the value of Yahoo! which has a market value of more than $35bn, is its minority stake in Alibaba, the Chinese internet giant.

Declining advertising revenues have illustrated Ms Mayer's difficulties in turning around Yahoo!'s performance, and attracted the attention of Starboard Capital, another activist fund, which has secured the appointment of a quartet of nominees to its board of directors (Other OTC: UBGXF - news) .