Microsoft will renew takeover talks with Yahoo! if the search engine group’s board is replaced at next month’s annual meeting.

Shares in Yahoo! closed up $2.56 at $23.91 as Microsoft said that it would be interested in reopening discussions to buy either the search business or the entire group if Carl Icahn, the billionaire activist investor, succeeded in his quest to replace the board at the shareholders meeting on August 1.

Microsoft made its statement after several conversations about a takeover of part or all of the business between Mr Icahn, a leading Yahoo! shareholder, and Steve Ballmer, Microsoft’s chief executive, in the past week.

Microsoft’s announcement will boost Mr Icahn’s campaign to replace Jerry Yang, the Yahoo! chief executive, and other senior management.

If successful, it could pave the way for Microsoft to achieve its goal of buying the group. Mr Icahn has nominated nine directors to replace Yahoo!’s board members, including himself, Frank Biondi Jr, former chief executive of Viacom, the media group, and Mark Cuban, owner of the Dallas Mavericks basketball team.

Mr Yang, who already has backing from shareholders such as T Boone Pickens, the chairman of BP Capital, and John Paulson, the hedge fund manager, believes that a sale is in the best interests of Yahoo!’s shareholders.

Mr Icahn began to lobby shareholders and the board after Mr Yang had rejected earlier approaches from Microsoft, which valued the company at $47.5 billion (£24 billion), as being too low. Mr Icahn and other investors are angry that shareholders were not given the opportunity to vote on the offer.

However, Microsoft pointed out that there could be no assurance of an offer being made or a transaction being agreed even if talks were reopened. In a statement, Microsoft said that it had concluded that it could not reach agreement with the Yahoo! board. “We confirm, however, that after the shareholder election Microsoft would be interested in discussing with a new board a major transaction with Yahoo!,” the statement said.

Yahoo! issued its own statement in response to Microsoft. “Yahoo!’s board of directors continues to stand ready to enter into negotiations with Microsoft for an acquisition of Yahoo!,” the statement said.

It gave no indication that the company had changed its stance on Microsoft’s offer.

“If Microsoft and Mr Ballmer really want to purchase Yahoo! we again invite them to make a proposal immediately. And if Mr Icahn has an actual plan for Yahoo!, beyond hoping that Microsoft might eventually consummate a deal which they have repeatedly walked away from, we would be very interested in hearing it,” the statement added.

Mr Icahn sent a letter to Yahoo! shareholders in which he said: “Much has been said about how badly the Yahoo! board has ‘botched up’ negotiations with Microsoft over the past months. There is no need to keep pointing out the mistakes I believe Yahoo! made by not immediately taking a $33 offer made by Microsoft.

“But one thing is clear – Jerry Yang and the current board of Yahoo! will not be able to botch up a negotiation with Microsoft again, simply because they will not have an opportunity.”

Separately, it is understood that a potential alternative deal under which Yahoo! and Time Warner’s AOL division merged their internet businesses is unlikely to be agreed before the August 1 meeting.

Yahoo! and Time Warner have been discussing a possible deal for several months but are not thought to be close to an agreement.

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