Icahn urges Yahoo to ditch "severance plan"

NEW YORK (Reuters) - Billionaire investor Carl Icahn has sent a letter to Yahoo's board asking that the company rescind a severance plan for full-time employees he says is the biggest impediment to a takeover deal with Microsoft Corp.

In the letter, Icahn said: "(Chief Executive Officer) Jerry Yang and a majority of the board went to inordinate lengths to sabotage a Microsoft bid."

Citing a "complaint", the activist investor said Yang engineered a takeover defense allowing full-time employees to quit with generous benefits. He urged Yahoo's board to rescind the severance plan, saying that removing the plan would free up $2.4 billion and possibly more which could be added to a Microsoft bid.

The Internet company faces pressure from Icahn and other shareholders over its failed talks for a $47.5 billion buyout from Microsoft.

Icahn has launched a proxy battle against Yahoo, accusing its board of driving Microsoft away, ahead of an August 1 shareholder meeting.