Launch Media operates Launch.com, a Web site that offers streaming audio, music videos, artist information and music news. Yahoo said the addition will complement its existing entertainment sites including Yahoo Music, Yahoo Broadcast and Yahoo Radio.
Under the terms of the deal, Yahoo will begin a cash tender offer to purchase all of Launch's outstanding shares at a price of US$0.92 per share, representing a value of about US$12 million. Yahoo also has extended a US$3 million loan to Launch, in addition to the US$2 million it lent the company last month.
Launch's shares closed Wednesday at US$0.58, well off last year's high of US$9.25.
The deal, which is subject to customary closing conditions, is slated to close in the third quarter of this year. Launch's board has unanimously approved the merger transaction.
Launch's operations will remain in Santa Monica, California, after the deal is finalized.
Also on Thursday, Launch said it has settled a copyright infringement suit brought by Universal Music Group and other major record labels in connection with Launch's Internet radio service. It has agreed to pay for content run previously on its site and to enter into a nonexclusive licensing agreement with Universal for the use of its recordings over its Web radio service, Launchcast.