Mr Icahn said in an open letter to the Yahoo board that he had acquired 59 million shares of Yahoo and had formed a 10-person slate which will stand for election against the current board.

'It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72 per cent premium over Yahoo's closing price of 19.18 dollars on the day before the initial Microsoft offer,' Mr Icahn said in the letter.

He added that he is seeking antitrust clearance to buy as much as US$2.5 billion (S$3.4 billion) worth of Yahoo shares.

'I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet.'

He added that in the past week, 'a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched'.

Mr Icahn said a combination between Microsoft and Yahoo 'is by far the most sensible path for both companies'.

The 72-year-old Icahn, an activist shareholder who has targeted companies ranging from airline TWA to General Motors, was ranked number 46 by Forbes magazine in its list of global billionaires, with a net worth of US$14 billion. -- AFP