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IAC to Buy Ask Jeeves for $1.85 Bil.

E-commerce powerhouse InterActive Corp. said it would buy Internet search engine Ask Jeeves in deal valued at $1.85 billion.

The acquisition would combine IAC's Internet real estate, travel and shopping businesses with the No. 4 Internet search engine. Ask Jeeves' properties, which include portal sites iWon and MySearch, are the No. 9 most-visited Internet sites, according to ComScore Media Metrix.

IThe deal would further shake up the Internet search market, adding a fourth well-financed competitor to challenge Google, Yahoo and Microsoft. Microsoft has made aggressive moves in search, introducing its own Internet search engine in February and announcing plans last week for its own search advertising system.

IAC said it would issue 1.27 shares of stock for each share of Ask Jeeves. The transaction, which was approved by both companies' boards of directors over the weekend, is expected to close late in the second quarter or early in the third quarter.

IAC said it would keep the Ask Jeeves brand, with the company operating as an IAC business unit. The company said it would integrate some of its 40-odd Internet brands—travel sites Expedia and Hotwire, local guide CitySearch, newly launched shopping site Gifts.com, and Ticketmaster—with the search site. IAC will also integrate Ask Jeeves search engine with its sites, which reach about 42 million users per month.

A sign of the potential collaboration could be a deal struck by IAC and Ask Jeeves last August. CitySearch supplies local content and business listings for local searches on Ask Jeeves.

Ask Jeeves struggled to establish itself as a credible search rival to Google and Yahoo, despite owning its own Web search technology, Teoma. Microsoft's recent foray into Web search highlighted the increasing competition in the search, which has established itself as the Internet entry point for many online consumers. Ask Jeeves operates search sites in the U.S., Great Britain, Japan and plans to soon launch in Spain.

Google, which supplies Ask Jeeves with search advertising listings, accounted for 69 percent of the company's revenue in 2004. In July, the two companies renewed their distribution deal through August 2007. Ask Jeeves last year made moves to diversify its revenues by starting AJInteractive, a marketing arm that sold ad products on Ask Jeeves and its portal sites.