Activist investor Carl Icahn escalated his attacks on Yahoo's

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[YHOO  Loading...      ()   ] beleaguered board Wednesday in an acerbic letter demanding the directors scrap an employee severance plan that drove up the potential costs of a Microsoft

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[MSFT  Loading...      ()   ] takeover.

In a "First on Fast" interview Carl Icahn makes his latest assault from the set of "Fast Money!" (Following are excerpts from his conversation with Dylan Ratigan and the traders.)

What are you expecting from the upcoming shareholders meeting?

"I think we’re going to be in a bit of a tiff,” says Icahn. “It’s going to be interesting.”

Do you like your odds?

“I think we have good odds,” he replies. "I’ve rarely seen a situation where the company has gone to such lengths to entrench themselves. I wonder why the shareholders don’t stand up more. This one is interesting because a lot of the large money managers have really come forward and shown their ire.”

What are your best alternatives?

“I certainly don’t want to see an alternative deal with Microsoft which they’re talking about. Some hybrid that would be valued at lot less than the 33 or 34 that they were talking about. And that would entrench the board and entrench Jerry Yang but would be terrible for shareholders.”

“I believe Yahoo is a very strategic and important acquisition for Microsoft and eventually I believe (the deal) will happen,” he adds.

But with a new board?

“You really might need a new board and a new CEO because of all this entrenchment and shenanigans that have gone on here. Microsoft might not have the faith in the current board and CEO Jerry Yang to be the steward of the company for a year (as the takeover is worked out). And that might be one of the reasons they walked away.”

“Another reason which is unconscionable in my opinion is this $2.5 billion severance package that the lawsuit speaks about. To me that is another reason why they don’t want to do it.”

Icahn is referring to the move made by Jerry Yang to push for generous benefits to all 13,800 of Yahoo's employees if they are laid off or reassigned, despite the misgivings of the company's outside consultants.

Yang wants protection for all Yahoo employees even though Microsoft CEO Steve Ballmer had assured him Microsoft would set aside $1.5 billion to retain employees after a takeover. “It’s completely disingenuous,” says Icahn. "And (Yahoo President) Sue Decker says today that we’re doing everything we can but the price isn’t high enough. Well the price isn’t high enough because of the new severance package. How do you go and tell Microsoft that you’re paying $45 billion but we’re (creating incentives) for this workforce to leave.”

What’s plan B?

“I believe very strongly that the only way Microsoft can compete with Google is to have Yahoo!, to have a presence in the search area. It’s obvious when you see how long Microsoft has been trying to acquire Yahoo! I believe if it’s not now then it’s 6 months from now,” Icahn says.

“What I think the shareholders have to do here is make their will known and tell these guys they’re not going to accept some alternative deal and they’re going to oust them if they don’t get something done!”


Read More:

> Reasonable vs. Ridiculous: The Yahoo Story

> Yahoo's Decker in 'Ongoing' Talks With Microsoft

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