SAN FRANCISCO — Barry Diller's electronic commerce company IAC/InterActiveCorp is buying online search engine Ask Jeeves Inc. for $1.9 billion and taking aim at the Internet's advertising market leaders.
The deal announced Monday represents Diller's bet that he can transform a second-tier search engine into a more formidable threat to industry leaders Google Inc. and Yahoo Inc., much like he built the once-irrelevant Fox television network into a major media player in the late 1980s and early 1990s.
The all-stock acquisition also fills a hole in IAC's diverse lineup of more than 40 Web sites, which include online travel agencies Expedia and Hotels.com, social sites Match.com and Evite.com and other popular services like Ticketmaster and Lending-Tree.
"We now have all the clay we need to do whatever we need," Diller told analysts during a conference call Monday.
New York-based IAC is paying 1.2668 of its shares for each of Ask Jeeves' roughly 69.4 million outstanding shares. The exchange ratio valued the takeover at $1.9 billion, or $27.40 per share, based on Monday's stock prices.
IAC's shares fell 66 cents, or 3 percent, to close at $21.63 in Monday trading on the Nasdaq Stock Market, where Ask Jeeves' shares surged $4.43, or 18.3 percent, to close at $28.67. Ask Jeeves' shares have ranged between $21.20 and $44.66 during the past 52 weeks.
Snapping up Oakland-based Ask Jeeves gives IAC a foothold in search engine advertising, the Internet's financial hot spot.