Icahn sent an open letter on 15 May to Yahoo chairman Roy Bostock threatening to oust the board and replace it with a group prepared to negotiate a deal with Microsoft.
"It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft," Icahn wrote.
"It is quite obvious that Microsoft's bid of $33 per share is a superior alternative to Yahoo's prospects on a standalone basis.
"During the past week, a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched."
Bostock issued a response to Icahn in an open letter of his own, explaining Yahoo's side in the Microsoft acquisition saga and chastising Icahn over his threat.
"Unfortunately your letter reflects a significant misunderstanding of the facts about the Microsoft proposal and the diligence with which our board evaluated and responded to that proposal," Bostock wrote.
"Conversely, 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."
The Yahoo board also attempted to dismiss any claims that it was not acting entirely in the interests of the shareholders.
Since the beginning of the saga in April, analysts have speculated that Yahoo veterans such as chief executive Jerry Yang would fight the deal out of disdain for the corporate culture at Microsoft.
"In short, Yahoo's board was at every point in this process prepared to enter into a transaction with Microsoft that would maximise stockholder value, and included certainty of value and closing," wrote Bostock.
"What Yahoo's independent board refused to do was to allow control of this company to be acquired for less than its full value."
Yahoo board fights back at Icahn
By Shaun Nichols on May 19, 2008 7:45AM