Google has announced that it is to buy video sharing website YouTube for $1.65bn (about £880m). The terms were finalised late yesterday and come after much speculation that a deal was about to take place.

Once the stock-for-stock acquisition has taken place, YouTube will operate independently of Google to "preserve its successful brand and passionate community", according to a Google press release.

The number of Google's shares to be issued in the transaction will be determined based on the 30-day average closing price two trading days before the completion of the deal. Though there is no firm date set for the acquisition, it should take place sometime in the fourth quarter of 2006.

Though Google has its own video search engine, Google Video, it had jealously coveted facilities within YouTube that allowed users to rate and recommend content to their contacts. However, the deal does not spell the end for Google Video - it will continue to operate separately.

Much mutual back-slapping accompanied the announcement. "The YouTube team has built an exciting and powerful media platform that complements Google's mission to organise the world's information and make it universally accessible," Eric Schmidt, CEO of Google gushed.

"By joining forces with Google, we can benefit from its global reach and technology leadership to deliver a more comprehensive entertainment experience for our users," Chad Hurley, co-founder and CEO of YouTube added.

In recent days. Google and YouTube have busily been signing agreements with record labels over the use of video content. Both companies struck separate deals with Sony BMG yesterday. YouTube has previously penned a contract with Warner Music Group, a company that Google yesterday came to an arrangement with.

http://www.youtube.com/
http://video.google.co.uk/
http://www.universalmusic.com/
http://www.sonybmg.com/

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