US telecom giant Verizon Communications Inc (NYSE:VZ) is snapping up internet group Yahoo! Inc (NASDAQ:YHOO) for nearly £3.8bn in cash.
Verizon is buying Yahoo's core internet business but the deal does not include Yahoo's lucrative stake in Chinese firm Alibaba.
It plans to merge Yahoo into its AOL business, which it bought last year, to create an internet division with more than 25 brands, including Yahoo Mail, Flickr, Tumblr and AOL's Huffington Post and Techcrunch sites.
Verizon said the acquisition of Yahoo, which has more than a billion active users a month, would make it a global mobile media company.
Yahoo’s chief executive Marissa Mayer said: "Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL."
News of the deal followed speculation on Friday that it could happen. Shares in Yahoo fell US$0.93 to US$38.44. Verizon's stock was also down by US$0.20 to US$55.90.