Internet giant Yahoo Inc. will pay an estimated $5.7 billion in stock to buy Dallas-based Webcasting company Broadcast.com Inc., a source familiar with the deal told The Times.
The deal would add Broadcast.com's "streaming media" service to the growing array of services on Yahoo's popular World Wide Web portal, which includes free e-mail and stock quotes. Streaming media allows audio and video to be broadcast over the Internet and marks the rapid convergence of radio, television and the Web.
Both companies' boards have approved the transaction, which will be formally announced today, the source said.
Yahoo will pay about $130 a share for all 38 million outstanding shares of Broadcast.com. The company will also make good on options for an additional 7.8 million shares of the company, the source said.
Neither company returned telephone calls Wednesday seeking comment on the deal.
Yahoo's purchase of Broadcast.com will be one of the largest Internet deals ever, underscoring the voracious buying spree by Internet companies determined to establish their dominance in cyberspace.
"I think this deal really does make sense," said Paul W. Noglows, an analyst with Hambrecht & Quist. "For Yahoo, it marks a significant jump-start into the broadband market. For Broadcast.com it opens streaming media to a much broader audience. This is really bringing streaming media to the masses."
Yahoo shares fell $3.94 to close at $168.38, and Broadcast.com rose $4.81 to close at $118.19, both on Nasdaq. After the close of regular U.S. trading, Broadcast.com shares rose as high as $125.02. Trading of both stocks was later halted.
Yahoo was advised by Goldman Sachs & Co., and Broadcast.com by Morgan Stanley Dean Witter & Co., according to a source.
Rumors of a deal began flying late Wednesday after trading was halted for both companies pending a news announcement. Yahoo later notified analysts that it had scheduled a media conference call for 8:30 this morning.
Shares of Broadcast.com had surged 40% over the last few weeks after BusinessWeek and the Wall Street Journal reported Yahoo's interest in buying the company.
The combination of Yahoo and Broadcast.com would create a Web behemoth well-positioned to take advantage of the expected increase in connection speeds that will eventually migrate into the home.
"These are smart companies preparing for the future," Noglows said. "Broadband isn't here now, but it is coming."
With higher speeds, Broadcast.com's expertise in streaming video and audio programs into computers will become a key component in Internet entertainment. Even at today's shuffling speeds, Broadcast.com has become a Net luminary as evidenced by the 2 million people who clogged the Internet when the company recently broadcast a Victoria's Secret fashion show.
Yahoo has been one of the most aggressive buyers on the Internet in its bid to further expand its dominance of the Web portal market. It acquired Marina del Rey-based home-page builder GeoCities in January for $3.9 billion.
Jae Kim, an analyst for Paul Kagan & Associates, said Yahoo's new deal for Broadcast.com not only made good business sense, but also was a good cultural fit.
"The philosophies and business models of both companies run tightly in sync with each other," he said.
Other recent Internet acquisitions include America Online Inc.'s purchase of browser-maker Netscape Communications Corp. for $10.2 billion and @Home Network's purchase of Internet portal Excite Inc. in an all-stock deal valued at $6.7 billion.
Dunn reported from Los Angeles and Menn reported from San Francisco. Times Wire Services were also used in compiling this report.