Starboard's Smith warns a full board sweep is not always possible

NEW YORK (Reuters) - Activist investor Jeffrey Smith, whose Starboard Value hedge fund wants to replace the entire board at Yahoo Inc (NASDAQ: YHOO), said this approach often works best to revive an ailing company but cautioned that path is not always possible.

At Yahoo, Starboard is working to repeat a feat that earned the hedge fund headlines two years ago, when it won all 12 seats at Darden Restaurants Inc (NYSE: DRI).

Replacing an entire board "seems to work really well," Smith said at the 13D Monitor's Active-Passive Summit.

A full sweep, he said, helps activist investors gain trust with management and lays the groundwork for a true partnership.

But he also acknowledged that companies are far more ready to find solutions so they can avoid the embarrassment and disruption of an expensive proxy fight. Starboard won 12 board seats at Darden in 2014, and Smith just stepped off the board after 18 months of working on a turnaround.

Now his firm has set its sight on Yahoo, where he said he has worked behind the scenes for months but is now pushing for the ouster of all nine of the internet company's board members, including Chief Executive Officer Marissa Mayer.

Yahoo, which has been trailing rivals in attracting online advertisers, has said it would review the nominees and has made no further public comment.

Similarly Starboard is looking to put six members onto the board at Depomed Inc (NASDAQ: DEPO), having been particularly irritated that the company rejected a takeover bid.

"We are in the process," Smith said.

Starboard may start other contests, he said, without dropping further hints. "It will be a case-by-case basis."

(Reporting by Svea Herbst-Bayliss and Michael Flaherty; Editing by Lisa Von Ahn)

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