Carl Icahn on Friday moved beyond his litany of criticism over what Yahoo! Inc. [YHOO] did wrong in its merger talks with Microsoft Corp. [MSFT] to suggest how the two companies could still reach a happy ending. The activist investor now is recommending that Yahoo! offer itself to Microsoft for $34.375 per share, or about $49.5 billion.

Icahn said that while that would be higher than Microsoft's "final offer" of $33 per share, the price could work for Microsoft if Yahoo! agreed to scrap its expensive severance plan, which Icahn has described as a poison pill in disguise. In a letter he sent to Yahoo! chairman Roy Bostock filed with the SEC, Icahn says he does not accept Yahoo!'s assertion that Microsoft isn't interested in the acquisition anymore, and believes that is just a defensive posture on the part of Microsoft, in response to Yahoo!'s talk of an alliance with search giant Google Inc. [GOOG].

Continuing the seemingly endless tit-for-tat with Icahn, Yahoo! issued a terse response to his latest letter. The company again defended its retention plan and criticized the notion of putting a price on its own head.

"His suggestion that we put out a price publicly to see if Microsoft will alter its stated position is ill-advised," Yahoo! said. "As we have stated numerous  times publicly and privately, we are open to any transaction including a sale to Microsoft if it is in the best interests of  shareholders." - Andrea Orr

See June 6 Icahn letter from SEC.gov
See June 6 Yahoo! response from SEC.gov
See June 5 story on Icahn and Yahoo! from TheDeal.com
See June 6 story on Icahn and Yahoo! from paidContent.org