Yahoo chairman Roy Bostock has challenged assertions from billionaire investor and  activist shareholder Carl Icahn that the firm's board of directors made a flawed move when it refused a $47.5 billion takeover bid from Microsoft, and reaffirmed that Yahoo would still be willing to an agreement if it were at a price chief executive and co-founder Jerry Yang saw as fair. On Thursday, the last day possible for nominating a slate of 10 candidates for a shareholder vote at Yahoo's yearly meeting planned for July 3, Icahn initiated a proxy battle for board member seats at Web pioneer Yahoo, in a move aimed to drive the Sunnyvale, California-based firm back into merger negotiations that would seek to complete a sale to Microsoft. Icahn Seeking To Increase Yahoo Stake To Six Percent Since Microsoft withdrew its bid Icahn has purchased some 59 million shares of Yahoo stock valued at more than $1.5 billion, representing more than 3.5 percent of the firm, and he said Thursday he would ask permission from the Federal Trade Commission to increase his stake in Yahoo to some 6 percent, or $2.5 billion. Icahn said should Yahoo return to the negotiating table with Microsoft the proxy battle might be averted. Since Icahn announced his intentions to launch a proxy fight, Microsoft has not offered to resume talks with Yahoo, referring Icahn to its official statement from earlier this month in which the Redmond, Washington-based company said that it has "moved on." A Thursday letter to Bostock found Icahn questioning the rationality of the current slate of Yahoo board members, which includes Yang, who holds a 10 percent stake in the firm he helped found. "It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft," noted Icahn. Icahn described the final Microsoft offer as fair, and as a "superior alternative to Yahoo’s prospects on a stand-alone basis." Yahoo Notes Icahn's "Significant Misunderstanding" Of Deal Negotiations Icahn has said the Yahoo board's decision to turn away Microsoft's final takeover offer was not in the best interest of Yahoo's shareholders, and that it was certain shareholders who drove him to pursue the proxy  fight he initiated Thursday. "It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72 percent premium over Yahoo’s closing price of $19.18 on the day before the initial Microsoft offer," Icahn said. In a letter of response Bostock told Icahn that his line of reasoning about the Yahoo deal Microsoft proposed "reflects a significant misunderstanding of the facts about the Microsoft proposal and the diligence with which our board evaluated and responded to that proposal." During final negotiations Microsoft had increased its initial $44.6 billion offer of February 1 to $47.5 billion, or $33 per share of Yahoo stock, however Yang and his management team held strong to a demand to accept no less than $53 billion, or $37 a share, an amount greater than Microsoft chief executive Steve Ballmer and his team were willing to pay, Ballmer said at the time. Yahoo Shareholders Face Pressure To Replace Board Of Directors In Thursday's letter to Icahn, Bostock said replacing Yahoo's board of directors was not in the best interest of its shareholders. "We do not believe it is in the best interests of Yahoo stockholders to allow you and your hand-picked nominees to take control of Yahoo for the express purpose of trying to force a sale of Yahoo to a formerly interested buyer who has publicly stated that they have moved on," Bostock said. "The record of our efforts to engage Microsoft in meaningful discussions is unequivocal," added Bostock. Microsoft trails search leader Google in both an online advertising market that was worth $40 billion in 2007 and is predicted to double to $80 billion by 2010, and in overall Internet search market share. Google Share Of Search Engine Market Nears 70 Percent The most recent data from Web traffic measurement firm Hitwise showed Google's share of U.S. online searches rose to 67.9 percent during April, while Yahoo held the second position with 20.28  percent, followed by Microsoft with 6.26 percent. Yahoo has continued to talk with Google about expanding a two-week search advertising test the companies performed recently. Google and Yahoo team members worked well together during the test, Google co-founder Sergey Brin said earlier this month. "We had a really good dynamic. We were able to implement it quickly. The technology teams got along well. They were able to get the protocols working very easily and able to gain a lot of insights," Brin added of the trial run. Icahn is not alone in his drive to replace the Yahoo board, gaining the support Thursday of hedge fund manager John Paulson, who is the founder of Paulson and Company and among the top 200 wealthiest Americans according to a list compiled by Forbes. Paulson has acquired a 3.6 percent stake in Yahoo and intends to assist Icahn in pushing Yahoo to resume acquisition talks with Microsoft, he said. Slate Of Ten Replacement Board Members Include Mark Cuban Joining Icahn on the list of replacement directors were New Line Cinema co-chief executive and co-chairman Robert Shaye, owner of the National Basketball Association’s Dallas Mavericks and founder of Broadcast.com Mark Cuban, Harvard law professor Lucian Bebchuk, chief executive of equity company ClearBridge Advisors Brian Posner, former Viacom chief executive Frank Biondi Jr., Icahn Enterprises executive Keith Meister, Impact Venture Partners managing general partner Adam Dell, former Fidelity fund manager Brian Posner, and Edward Meyer, the former Grey Global Group chief of advertising. In his Thursday letter to Icahn, Bostock reiterated that no deal is on the table from Microsoft. "May I remind you that there is currently no acquisition offer on the table from that company (Microsoft) or any other party," noted Bostock. Related Links:
| 
4:10 pm on May 16, 2008 (utc 0)