It seems to be the fault of the mainfest Merger tool for gradle.
http://tools.android.com/tech-docs/new-build-system/user-guide/manifest-merger
Solved it by adding to my manifest tag xmlns:tools="http://schemas.android.com/tools"
Then added tools:replace="android:icon,android:theme"
to the application tag
This tells the merger to use my manifest icon and theme and not of other libraries