Activist investor takes stake in Yahoo, urges AOL combination

SAN FRANCISCO (Reuters) - Activist INVESTOR (INVEB.ES)Starboard Value LP said on Friday it has acquired a significant stake in Yahoo Inc and urged the struggling Internet company to cut costs, monetize its Asian assets and seek a "strategic combination" with AOL Inc .

Shares of Yahoo Inc were up 3.75 percent at $40.41 at midday.

In a letter to Yahoo Chief Executive Marissa Mayer, Starboard said it was looking forward to "engaging directly" with Yahoo to discuss how its plan could be implemented in a timely manner.

"We believe a merger of AOL and Yahoo's core business may be one of the best ways to both fully seize the cost reduction opportunity and also to tax efficiently monetize Yahoo's non-core equity holdings," the letter said.

(Reporting by Alexei Oreskovic; Editing by David Gregorio)