By Nancy Kercheval and Kyung Bok Cho
Bloomberg News
Monday, July 14, 2008

Yahoo rejected a proposal from Microsoft and billionaire investor Carl C. Icahn that would have broken up the Internet company, saying they were trying to "coerce" officials into selling assets.

Under the plan, Yahoo's board and top management would have been replaced. Microsoft would have bought Yahoo's search business and left Icahn with the rest of the company, an "odd and opportunistic alliance" that didn't have the best interests of shareholders in mind, Yahoo said.

"Carl Icahn and Microsoft presented us with a 'take it or leave it' proposal," Chairman Roy Bostock said in a statement. "It is ludicrous to think that our board could accept such a proposal. We will not be bludgeoned into a transaction that is not in the best interests of our stockholders."

The decision steps up pressure on Yahoo chief executive Jerry Yang to prove that his alternative deal, a partnership with Google, can deliver better returns. Icahn is challenging Yang for control of the board at an Aug. 1 meeting.

Yahoo said it was given a day to weigh the proposal, made Friday evening. Some of the ideas, including spinning off the Asian investment assets and returning cash to shareholders, are actions the board is already considering.