Yahoo Inc announced it will appoint activist investor Carl Icahn and two of his nominees to its board. The move settles a proxy battle and also makes an immediate deal with Microsoft Corp less probable.

Yahoo announced the settlement today (Monday), 11 days before Yahoo's August 1 annual shareholders meeting at which Icahn was planning to replace the entire board with his own nominees and get rid of Yahoo Chief Executive Jerry Yang. Icahn didn’t have the support of prominent Yahoo shareholders such as Legg Mason fund manager Bill Miller, who made clear a few days ago that he is backing Yahoo's board.

The above mentioned shareholders were concerned not only about an imminent sale to Microsoft, but also that Icahn didn’t come up yet with concrete plans to turn around the company which has been losing ground to Google Inc. To be more precise, Microsoft did not offer to buy the whole company, just Yahoo search.

Yahoo’s shares decreased 20 cents, or nearly 1%, to $22.25 in pre-market trading. The company’s stock is currently far below Microsoft's last offer price of $33 per share. The offer was withdrawn in May.

Yahoo reached a deal with Icahn under which they gave the billionaire a three board seats to settle the battle for control of the company. After this move, the board will expand to 11 members and current director Robert Kotick will leave, according to a statement released today by Yahoo.