Icahn launches proxy battle against Yahoo

Icahn harshly criticized Yahoo for the breakdown in talks, saying he had accumulated 59 million shares and options in Yahoo and had assembled a 10-member dissident board slate for election at Yahoo's annual meeting on July 3.

In an open letter to Yahoo chairman Roy Bostock, Icahn said the board had "acted irrationally and lost the faith of shareholders and Microsoft. It is obvious that Microsoft's bid of $33 per share is a superior alternative than Yahoo's prospects on a stand alone basis." (For text of letter see nN15278966)

Icahn urged Yahoo to "move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary."

Icahn's move garnered public support from at least one other large investor. Paulson & Co., a $30 billion hedge fund that raked in billions of dollars betting on the credit meltdown, disclosed Thursday it had amassed a 3.4 percent Yahoo stake worth $1.44 billion.

"We intend to support the Icahn slate, but sincerely hope Yahoo will negotiate an agreement with Microsoft, thereby making a proxy fight unnecessary," said Paulson.

On Thursday, Microsoft spokesman Frank Shaw repeated the same line it has used since the talks ended. "The company has moved on," he said. Yahoo declined to comment.