Financier Carl Icahn has launched a proxy battle to force Yahoo to reopen buyout talks with Microsoft, saying the Yahoo board acted "irrationally" in refusing Microsoft's USD 47.5 dollar offer.

Criticizing the Yahoo board for the breakdown in talks, Icahn says he has assembled a 10-member dissident board slated for election at Yahoo's annual meeting on July 3.

In a letter to Yahoo Chairman Roy Bostock, Icahn says, “It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo's closing price of USD19.18 on the day before the initial Microsoft offer.”

But he has left the door open for a settlement. "I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary," said Icahn.

His letter goes on to say: "I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger. With Microsoft, thereby making a proxy fight unnecessary."