Yahoo! to Purchase Overture

NEW YORK Yahoo! said Monday that it plans to buy Overture, a provider of pay-for-performance search to Web sites, in a stock and cash transaction valued at $1.63 billion.

The deal, subject to regulatory and shareholder approval, calls for Sunnyvale, Calif.-based Yahoo! to offer 0.61 shares of its common stock and $4.75 in cash for each outstanding common share of Overture.

The acquisition advances Yahoo!’s objective of becoming a leading search provider, combining assets capable of generating, distributing and monetizing search results.

As of late, Yahoo! has made moves to take advantage of commercial search, a segment that is projected to grow from about $2 billion by year-end 2003 to about $5 billion by 2006, according to Piper Jaffray. In December, Yahoo! bought Inktomi, a provider of algorithmic Internet-search technology, and in April, the Web portal introduced a new search product.

Combined, Yahoo! and Overture intend to expand pay-for-performance search into Yahoo!’s vertical properties, such as travel and yellow pages, and integrate contextual advertising throughout its network, including its sports, real estate and auto properties. Yahoo! also said it plans to offer Overture’s 88,000 advertisers, the majority of which are small- to medium-size businesses, the ability to sell and promote online by purchasing a range of additional services, such as Web hosting.

Overture will become a wholly owned subsidiary of Yahoo!, and its operations will remain in Pasadena, Calif., following the completion of the acquisition, which is expected to close in the fourth quarter. Overture president and chief executive Ted Meisel will continue to run the unit, reporting to Yahoo! chief operating officer Dan Rosensweig.

In making the purchase, Yahoo! gains two assets recently purchased by Overture: AltaVista, a Palo Alto, Calif.-based Web-search company, and the Internet-business unit of Oslo, Norway-based Fast Search & Transfer. Those acquisitions were made in an effort to strengthen Overture’s paid placement, paid inclusion, and algorithmic Web-search products and services for syndication to portals, ISPs and other search-destination sites.