Spanish internet group Terra Networks has confirmed that it will buy US internet portal Lycos for $12.5bn - the world's first acquisition of a US portal by an European company.
The widely predicted move will give Terra, the internet arm of Spanish telco Telefonica and Latin America's dominant ISP, an important springboard into the US.
The combined company, which will be called Terra Lycos, is expected to report $500m in revenue this year and control an estimated 50 million unique users.
Juan Villalonga, chairman of Terra Networks and Telefonica, will become chairman of the new company, and Lycos chief executive Robert Davis will be chief executive.
"[Lycos] has jumped from a strong internet competitor to a global powerhouse," said Davis.
As part of the agreement Germany's Bertelsmann AG, the third largest media company in the world, has agreed to invest $1bn worth of advertising and buy integration services from Terra Lycos worldwide during the next five years.
In return, Terra Lycos will gain access to Bertelsmann's books, music, television, film and other media content on preferred terms.
Telefonica also agreed to invest $2bn in Terra Lycos.
Analysts said Terra would benefit from Lycos' strong presence in online communities and chatrooms as well as specialised content. Terra is already Europe's largest publicly traded internet company with a market value of nearly $17bn.
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