Yahoo Inc said its board has formed a committee of independent directors to explore strategic alternatives, alongside its plan to revamp and spin off its Internet business.
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The move comes two days after Bloomberg reported activist investor Starboard Value LP was taking initial steps toward a potential proxy fight with Yahoo.
Starboard, which owns about 0.75 percent of Yahoo, has been pushing for changes at the Internet company since 2014, asking it to separate its Asian assets and sell the core business.
Shares of the company were up 2.6 percent at $30.19 in premarket trading.
Yahoo and its Chief Executive Marissa Mayer are under growing pressure from impatient shareholders to turn the web pioneer's flailing Internet business around.
Yahoo announced this month it was considering strategic alternatives for its core Internet business, and said it would cut about 15 percent of its workforce.
In December, Yahoo shelved plans to spin off its stake in Chinese ecommerce giant Alibaba Group Holding Ltd and said it would create a separate company that would house Yahoo's Internet business and its stake in Yahoo Japan.
"Separating our Alibaba stake from Yahoo's operating business is essential to maximizing value for our shareholders," Mayer said in a statement, while emphasizing that everyone at Yahoo wanted to return the "iconic company to greatness."
The committee and its advisers are working on a process for reaching out to and engaging with potentially interested strategic and financial parties, the company said on Friday.
Yahoo had earlier this month engaged with interested parties individually, but had yet to run a formal auction process, according to people familiar with the matter.
The committee will recommend any proposed transaction to the board which it feels is in the "best interests" of Yahoo and its shareholders.
Verizon Communications Inc is among the technology, media and telecommunications companies seen as potential buyers of Yahoo's core business. Verizon's chief financial officer said in December such a sale could make sense though it was premature to discuss.
The committee has engaged Goldman Sachs & Co Inc, J.P. Morgan and PJT Partners Inc as financial advisers, and Cravath, Swaine & Moore LLP as legal adviser.
(Reporting by Anya George Tharakan in Bengaluru and Greg Roumeliotis in New York; Editing by Sriraj Kalluvila and Shounak Dasgupta)