Legg's Miller backs Yahoo in proxy war with Icahn

By Muralikumar Anantharaman and Eric Auchard

BOSTON/SAN FRANCISCO (Reuters) - Fund manager Bill Miller, one of Yahoo Inc's top shareholders, dealt a blow on Friday to billionaire investor Carl Icahn's two-month campaign to replace the Internet firm's directors, throwing his support behind Yahoo's current board.

Miller, a prominent portfolio manager at Legg Mason Inc, also called for an end to the "disruptive" battle between Yahoo and Icahn, an activist shareholder who has sought to force Yahoo to restart talks to sell itself to software maker Microsoft Corp.

Miller urged Icahn and Yahoo to settle their differences ahead of an August 1 annual meeting where shareholders will vote to elect the entire board of the company.

"It is our intention to vote in favor of the slate of directors proposed by the current board," said Miller, who is chairman and chief investment officer at Legg Mason Capital Management, in a statement.

Legg Mason's 4.4 percent stake of 60.7 million shares makes it Yahoo's second-biggest institutional shareholder.

Since February, Yahoo has rebuffed Microsoft's $47.5 billion offer to buy the firm, triggering a slide in Yahoo's stock price and paving the way for Icahn to align himself with Microsoft and start a proxy battle.

Icahn announced in May he had amassed a stake that now totals about 5 percent of Yahoo shares.

Microsoft has since made alternative proposals to Yahoo, which says it's open to a takeover by the software titan but little headway has been made.