Now We Know The Activist Investor's Secret Plan For Yahoo...

As we noted last week, the activist investor who launched a campaign against Yahoo wants to combine the company's operations with AOL.

The investor, Starboard, also tantalizingly suggested that this combination would leave AOL as the surviving company, not Yahoo.

Now, thanks to CNBC's John Jannarone, we know how Starboard wants to effect this combination.

Starboard wants to spin off Yahoo's core business and merge it with AOL's, leaving "Yahoo" as little more than a holding company that owns stakes in Alibaba and Yahoo Japan.

This would allow Yahoo to avoid paying more taxes on its Alibaba gains. It would also allow the company (theoretically) to unlock the value of its Asian assets without violating the agreement it just made to not sell or transfer its Alibaba stake for a year. In this plan, the Alibaba stake would be staying put - it would be Yahoo's actual business that would be unloaded.

To comply with US tax rules, the Yahoo holding company would have to retain a small operating business. So Yahoo would have to leave something behind. But among all of the businesses that Yahoo owns, there is almost certainly something that no longer fits well with the core.

Meanwhile...

Yahoo's core business would be spun into AOL, likely via AOL acquiring the Yahoo operations by issuing stock.

Under US tax rules, Yahoo shareholders would have to end up owning the majority of the new company. But Yahoo's operations are considerably bigger than AOL's, so this wouldn't be a high hurdle to meet.

Company names wouldn't be a deterrent: If the combined company preferred the "Yahoo" name, AOL could change its name to "Yahoo" and Yahoo could change its name to "Huge Asset Holding Company Formerly Known As Yahoo" or something more mellifluous.

What would be a question would be which management team would lead the combined company. Yahoo's management team? AOL's management team? Or a combination of the two?

And where would the headquarters be located?