Yahoo has yet again rejected a bid by Microsoft that would have seen its search engine absorbed by the computing giant.

But this time, the offer also included the proposal that billionaire investor, Carl Icahn, who has been buying up Yahoo shares, and vocally denouncing its board, would have bought up the rest of the company.

Yahoo has revealed in a statement that it received a joint proposal from Microsoft and Icahn on Friday evening and was given less than 24 hours to accept.

Aparently, Microsoft and Icahn made it clear that they would not negotiate the fundamental terms, which include the immediate replacement of Yahoo's board and removal of top management.

The company said the "take it or leave it" deal that was offered would also preclude a potential sale of all of Yahoo "for a full and fair price, including a control premium".

"This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo's stockholders in mind", Yahoo Chairman Roy Bostock said in the statement.

"Clearly, Microsoft, having failed to advance in search, is aligning with the short-term objectives of Mr. Icahn to coerce Yahoo into selling its core strategic search assets on terms that are highly advantageous to Microsoft, but disadvantageous to Yahoo stockholders", Bostock continued.

Now the battle lines are formed for Yahoo's annual meeting on 1 August, when it is now clear that Icahn will try to oust Yahoo's chief exec Jerry Yang and replace the nine-member board with his own slate of directors.

"While this type of erratic and unpredictable behavior is consistent with what we have come to expect from Microsoft, we will not be bludgeoned into a transaction that is not in the best interests of our stockholders", Bostock concluded.