In 2012, Starboard Value CEO Jeffrey C. Smith thought AOL was so poorly run that he mounted a proxy fight to land three candidates on AOL’s board.

Two years later, Smith thinks AOL is so well run that it represents Yahoo’s best chance to return value to shareholders.

On Friday, the activist hedge fund sent a public letter to Yahoo CEO Marissa Mayer, claiming they'd taken a “significant ownership stake” in the company and recommending, among other things, that Yahoo explore a strategic combination with AOL.

That combination would allow Yahoo to take advantage of AOL’s investments in advertising technology as well as reduce the overhead on sales at both companies. Further, Starboard argues that Yahoo should combine with AOL “even if this may mean accepting AOL as the surviving entity in a combination, should that be the best and most efficient tax structure.”

In other words, AOL should acquire Yahoo, meaning AOL CEO Tim Armstrong should run the combined company. Smith’s letter doesn’t explicitly say that, but that’s the implication. Representatives at Starboard did not respond to a request for further comment.

This is a huge about-face from three years ago when Starboard mounted a months-long battle with Armstrong over his strategy at AOL, including the acquisition of Huffington Post for $315 million and AOL’s continued investment in Patch, a network of local news sites.

Smith lost that battle but got some of what he wanted: AOL sold a portfolio of more than 800 patents to Microsoft for $1.06 billion and used the funds to reward shareholders. AOL also explored a deal with Yahoo, which never came to fruition.

In going after Yahoo, Smith is also taking on another activist investor, Third Point’s Daniel S. Loeb, who helped spirit Mayer away from Google and install her as CEO of Yahoo. Loeb's investment in Yahoo turned out to be hugely profitable. He started buying Yahoo shares at $11 and sold 40 million back to Yahoo in 2013 at $29.11.

Yahoo acknowledged receipt of Starboard’s letter late Friday: “We will review Starboard's letter carefully and look forward to discussing it with them," Mayer said in a statement.

Since his tussle with Starboard, Armstrong has focused on building out AOL’s collection of ad technologies with a series of deals such as 5min Media and that have made AOL the third-largest purveyor of Web video in the U.S. behind YouTube and Facebook. AOL is presenting its ad tech “stack” -- the plumbing that powers online advertising -- as an alternative to Google’s DoubleClick.

But more important for Starboard, AOL's stock has gone from just under $12 a share in August 2011 to $44.55 today. And that's what Starboard, or any activist shareholder, is really all about.