In a deal that brings together one of the top online media companies and the leading paid-listing company, Yahoo said it's buying Overture Services for $1.63 billion in stock and cash.

We think this marketplace is very early on," said Yahoo's chief operating officer, Daniel Rosensweig, in an interview. "We can't sit back and wait."

By combining the leader in both traditional advertising and paid listings, Yahoo would "accelerate this position in this marketplace," Rosensweig said.

As part of the deal, Yahoo will pay $4.75 in cash for each Overture share. Overture shareholders will also receive just over six-tenths of a share -- 0.6108 -- of Yahoo for each Overture share they've held.

That means Overture shareholders would receive $19.66 in Yahoo stock plus $4.75 in cash for a total of $24.40 per Overture share. That's a 13 percent premium above Overture's close Friday.

Yahoo fell 2 percent to $32.14 while Overture shot up 12 percent to $24. Some analysts expect the deal to be dilutive since Overture will likely lose its distribution deal with Microsoft. Microsoft and Yahoo accounted for 65 percent of Overture's sales in the first quarter.

Rosensweig would not comment on the Microsoft relationship, only to say that Yahoo would like to maintain the Microsoft MSN distribution partnership that Overture now enjoys. He pointed to Microsoft's relationship with Inktomi as an example of a situation in which Yahoo can work with Microsoft. Yahoo purchased search technology company Inktomi in December, a move that signaled that it was seriously considering the build-out of its search business.

Timing?

The news comes one week after Yahoo announced earnings that just met earnings expectations. At the time, Yahoo CFO Susan Decker said Yahoo expected traditional advertising to grow between 8 and 12 percent. The paid-listings business, which Overture dominates, has been forecast to grow as much as 35 or 40 percent a year. Clearly, the paid-search business remained the fast-growing portion of Yahoo's marketing services business.

The deal also comes at a time when Overture shares have recaptured the $20-mark, a level it had not traded at since February. Since February, however, the stock had languished, giving Yahoo the opportunity to make its move. It had been speculated that Yahoo should consider buying Overture for some months.

The fact that Yahoo is making the deal at Overture's more recent highs led some analysts to believe that Yahoo made the move to pre-empt Microsoft.

Rosensweig shed little light on what prompted Yahoo to make its above at a time that Overture's shares resurged back above $20.