Icahn seeks FTC clearance to acquire $2.5 billion worth Yahoo! stock; threatens proxy fight

Accusing the board of directors of Yahoo of having acted "irrationally", activist shareholder Carl Icahn has sought clearance from the Federal Trade Commission to acquire up to approximately $2.5 billion worth of Yahoo stock. This is in addition to the 59 million shares and share-equivalents of Yahoo that Icahn said he had acquired in the last 10 days.

In a letter to Roy Bostock, chairman Yahoo! Inc, Icahn has faulted the board for not allowing shareholders to accept Microsoft's offer oa a 72-per cent premium to Yahoo!'s closing price of $19.18 the day before the initial Microsoft offer, which he said wpould create a "force strong enough to compete with Google on the Internet."

Yahoo co-founder and chief executive Jerry Yang had sought a minimum $37 a share bid for itself against Microsoft's offer of $33 a share.

The Yahoo! scrip, which was ruling at around $19 before Microsoft bid, have been hovering around $25, even below the original Microsoft offer of $31, efer since Microsoft announced the withdrawl of its interest in a deal with Yahoo!.

Icahn, is banking on the support of several other Yahoo shareholders, who are at odds with the Yahoo! management for rejecting Microsoft offer. He warned in his letter that he had been asked by a number of shareholders to lead a proxy fight to attempt to change the board to negotiate a successful merger with Microsoft, "something that in my opinion the current board has completely botched." 

Apart from informing Bostock of his share purchases and intention to acquire a higher stake, he also forwarded the names of his 10-member slate who he planned to try to replace the entire Yahoo! board with in order to attempt to renegotiate with Microsoft.

Icahn also warned against any alliance with Google as among the "strategic alternatives", that had been repeatedly mentioned in media reports, that "impede a future merger with Microsoft. "I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary."

(See: Text of Carl Icahn's letter to Yahoo! Inc. chairman Roy Bostock)