Lycos is being gobbled up by Spanish Internet firm Terra Networks.

The merged company plans to expand its U.S., European, and Latin American markets and become the planet's first truly global Internet powerhouse.

The merger could give Internet heavyweights America Online, Yahoo, and others a run for their money, say observers. It's expected to become final in the third quarter of this year.

Representatives of both companies announced the deal, worth £8 billion. If approved by shareholders, the deal creates a global Internet Goliath called Terra Lycos.

The new company will reach 50 million users in 37 countries and become a multilingual, global Web portal and Internet access provider.

"Overnight, in one fell swoop, this company has jumped from a strong Internet competitor to a global powerhouse," says Bob Davis, Lycos chief executive, who will retain his job with Terra Lycos.

The deal has set the cat amongst the Internet pigeons because it is the first time a European company has acquired a U.S. search portal.

At the same time, the merging of Internet powerhouses raises the stakes in global Internet competition.