Yahoo! to Purchase eGroups - TheStreet

Updated from 10:20 a.m. EDT

Yahoo!

(YHOO)

, the top Internet portal, said Wednesday that it will buy closely held

eGroups

, an email group communication service, in a stock deal valued at about $432 million.

Under the terms of the agreement, Yahoo! will issue 3,428,136 shares of its stock for all outstanding shares, options and warrants of eGroups. Based on Yahoo!'s closing price Tuesday of 125 15/16, that translates to an acquisition price of about $432 million.

The Santa Clara, Calif.-based portal expects to take a one-time charge in the third quarter because of expenses related to this transaction. Currently, analysts polled by

First Call/Thomson Financial

expect Yahoo! to record earnings per share of 11 cents in the third quarter.

eGroups, based in San Francisco and Redwood City, Calif., is a free service that allows people to create or join email groups to share interests and exchange ideas. There are already more than 800,000 active groups that range from holistic & integrated medicine to gambling. The company boasts over 17 million members and employs more than 150 people.

"The addition of eGroups' technology and resources strengthens the communication services Yahoo! currently provides users and gives them more ways to stay in touch with other individuals," said Jeff Mallett, president and chief operating officer of Yahoo! in a statement. "The ability to create, manage and join email groups is something our users have been asking for."

The deal is expected to be completed in the third quarter.

Shares of Yahoo! closed at 123 9/16, down 2 1/4 or 2%, in Wednesday trading.