InfoSpace

(INSP) - Get Report

, founded by a former Microsoft engineer, announced Wednesday that it would buy

Go2Net

(GNET)

, a Web-site operator, in a stock deal valued at $2.7 billion.

The agreement blends two Internet software service providers, giving the companies a base of nearly two million merchants. Under the terms of the deal, InfoSpace, based in Redmond, Wash., said it would exchange 1.82 shares of its stock -- valued at $86.91 -- for one share of Go2Net's 30.7 million shares. Based on InfoSpace's closing stock price Wednesday, the deal would value Go2Net at $86.91 a share, a 44% premium over its stock price.

Microsoft co-founder Paul Allen's Vulcan Ventures, along with Go2Net chairman and chief executive Russell C. Horowitz and other Go2Net executives control about 40% of Go2Net's outstanding stock and have agreed to vote their shares in favor of the deal, the companies said.

Naveen Jain, the former Microsoft engineer who is chairman of InfoSpace, and other InfoSpace board members also have said they would support the transaction, voting about 40% of InfoSpace's outstanding stock in favor of the deal.

"Today marks another historic milestone in the history of the rapid evolution of InfoSpace," Arun Sarin, chief executive of InfoSpace, said in a statement. Sarin will become vice chairman and CEO of the combined firm, while Go2Net's Horowitz will be vice chairman and president. The combined company, meanwhile, will assume the name InfoSpace.

The deal was announced after the stock market closed. InfoSpace's stock climbed 1 7/16, 3%, to close 47 3/4 in

Nasdaq

trading Wednesday, while shares of Go2Net fell 1 9/16, or 2.5%, to close at 60 9/16.

The deal must still gain approval by shareholders of both companies as well as regulators.