Yahoo makes Overture worth £1bn
Published: 14 Jul 2003 14:29 BST
Yahoo announced on Monday that it plans to buy search firm Overture Services in a $1.63bn (£1bn) deal, in a move squarely aimed at taking on competitors in the search-engine market.
The deal calls for each share of Overture stock to be exchanged for 0.6108 shares of Yahoo and $4.75 in cash, valuing each share of Overture at $24.63, roughly a 15 percent premium over Overture's closing price on Friday.
Yahoo said the deal will allow it to expand its pay-for-performance search business and expand contextual advertising throughout its network. Overture specialises in selling advertising links that accompany search results on sites like Yahoo and MSN. It's a market where search rival Google has been making inroads.
But Overture had been fighting back against Google, making acquisitions designed to help it offer a broader array of search services.
Yahoo has also been getting more competitive about search, recently acquiring Inktomi, an algorithmic search company that competes more directly with Google.
The search market will also face new competition from Microsoft. The software giant recently launched new software to index Web sites, and hired top scientists as part of its efforts to make headway in the lucrative market.
Search is a key element in Yahoo's advertising business, which, while growing, is just meeting analysts' expectations. The company's earlier partnership with Overture accounted for nearly one-fifth of Yahoo's overall first-quarter revenue, the company recently reported.
"Overture pioneered commercial search, and we believe there remains huge upside potential in this market," Overture chief executive Ted Meisel said in a release. Meisel will continue to oversee Overture operations, and will report to Yahoo chief operating officer Dan Rosensweig.
In a conference call on Monday morning, Yahoo cited as a key impetus for the acquisition the increasing opportunity to target small-business customers and to tap into foreign advertising markets, in Europe and Asia specifically. Yahoo officials said the deal made more sense than attempting to separately build holdings comparable to those of Overture, based on that company's standing in the paid-search business and the time required.
The deal is expected to be completed by the fourth quarter of the year.
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