Microsoft acquires online advertising company for $6 billion: Largest deal in its history

Microsoft announced the largest acquisition in its history this morning.

It is buying Seattle-based online advertising giant aQuantive for $6 billion, or $66.50 per share of aQuantive's stock.

That's a premium of more than 85 percent per share over Thursday's closing price for aQuantive of $35.87. The advertising company's shares leapt $27.92, or nearly 78 percent, to $63.79 at the close of trading today.

Microsoft executives said the deal will help the company gain a bigger share of the online advertising market, estimated to reach $40 billion and growing at 20 percent annually. The company faces stiff competition from online advertising leader Google, which has made major acquisitions of its own recently.

"It is a big bet on advertising monetization for the long-term growth of the company and this is a significant step forward," Kevin Johnson, president of Microsoft's Platforms and Services Division, said during a conference call this morning.

The acquisition is about three times larger than Microsoft's next-biggest transaction. Financial analysts questioned the challenge of integrating the two companies.

Only a year ago, Microsoft launched its own advertising network called AdCenter. Executives said aQuantive's assets will complement Microsoft's own.

It will allow Microsoft to earn more money from selling advertising on its own Web sites and online services, which have a combined audience of 500 million people, Johnson said.

With $142.6 million in first-quarter revenue, aQuantive is one of the largest players in digital advertising. Founded in 1997, the company consists of three major businesses: Atlas, which provides digital marketing technology; DRIVEpm, which matches advertising inventory from content publishers with advertisers; and, Avenue A | Razorfish, an online advertising agency.

Microsoft Chief Financial Officer Chris Liddell said the bidding for the company was competitive, though he did not name the competition.

Analysts on the conference call questioned the premium price Microsoft is paying in the deal, which executives expect to complete in the second half of the year, pending approval from regulators.

Microsoft has complained that Google's recent acquisition of DoubleClick, a major provider of online display advertising services, will reduce competition in the online advertising market.

Microsoft General Counsel Brad Smith said this deal is fundamentally different and will promote competition because aQuantive has three lines of business and "Microsoft today is in none of those businesses."