Yahoo Buying Search Pioneer Overture For $1.6 Billion

The deal would further Yahoo's strategy of moving from being a mainly advertising-supported site - a model that fell apart with the Internet bust - to a more diversified company with several kinds of subscription and ad-based revenue streams.

"Together, the two companies will be able to provide the most compelling and diversified suite of integrated marketing solutions around the globe, including branding, paid placement, graphical ads, text links, multimedia, and contextual advertising," Yahoo chief Terry Semel said in a statement.

Under the system employed by Overture, formerly known as GoTo.com, advertisers bid for the right to have their links displayed under specific search terms. The auction determines the order in which the links are displayed on a Web page.

Pasadena, Calif.-based Overture licenses its results to a wide range of Web sites - including Yahoo - that take a cut of the fees generated whenever someone clicks on an advertiser's link displayed under in a section typically labeled as "sponsored results."

Trading in Yahoo and Overture shares was halted at the start of trading Monday morning on the Nasdaq Stock Market.

The deal calls for each Overture share to be converted into 0.6108 shares of Yahoo stock and $4.75 in cash. Overture would become a wholly owned subsidiary of Yahoo, and its chief, Ted Meisel, would report to Dan Rosensweig, Yahoo's chief operating officer.

The deal requires regulatory and shareholder approval but could be completed by the fourth quarter, the companies said.

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