Yahoo! To acquire Overture Services Inc. for 2.44 times revenue

Weekly Corporate Growth Report, Jul 21, 2003

The Deal: Yahoo! Inc. has agreed to Acquire Overture Services Inc. for $1.63 billion in cash and stock. Yahoo! will pay $4.75 in cash and 0.6108 shares of Yahoo! stock for each share of Overture. The transaction is expected to close in the fourth quarter of 2003.

Discussion: Overture Services, formerly known as GoTo.com, generates revenue by allowing more than 80,000 advertisers to bid for placement in its Internet search results. The highest bidder becomes the first Web site the user sees. Advertisers pay Overture every time a surfer clicks through from the search engine to the advertiser's Web site.

Yahoo! hosts one of the Internet's top portals. The company draws 220 million visitors each month to its site, which provides a search engine and directory to help users navigate the Web. The company posts content in the form of news, financial information, and streaming media sources and also offers personalized services to subscribers including Web pages, e-mail, chat rooms, and message boards. Yahoo! hosts 25 international sites in 13 languages. Most of the company's revenue is derived from advertising.

Yahoo! has stated that it will continue serving Overture's affiliate partners, including Microsoft's MSN unit. The acquisition will help Yahoo! compete against Google, which provides an ad placement service similar to Overture's. The deal will also help generate more revenue overseas.