In an open letter to the board, Icahn cautioned against the deal, arguing that it was a mistake to commit AOL to using Google's search engine for the next five years. "I believe it would be a blatant breach of fiduciary duty to enter into an agreement with Google that would either foreclose the possibility of entering into a transaction that would be more beneficial for Time Warner shareholders or make such a transaction more difficult to achieve," he wrote.
Icahn, who currently controls about 3 percent of Time Warner stock, intends to wage a proxy fight at the annual shareholders meeting next year.
Icahn quoted from a recent Goldman Sachs report concluding that eBay or InterActive Corp. would be a better match for AOL than Yahoo!, MSN, or Google.
But a Goldman Sachs report issued Sunday stated that Google's deal with Time Warner to buy a stake in AOL was "a net positive" for Time Warner, Google, and Yahoo! The report stated that the deal potentially helps AOL gain traffic and ad revenue, while it preempts MSN--which had vied for a stake in AOL--from gaining AOL's search users.
A separate Merrill Lynch report issued Monday also struck a somewhat optimistic note. "Assuming final details ... are similar to what has been reported, we would view the agreement as incrementally positive," wrote research analyst Jessica Reif Cohen.