Yahoo seems to have finally rejected a takeover by Microsoft by signing a joint search and advertising deal with Google.

While the deal doesn’t stop Microsoft coming back with another bid, a $250m termination fee would be incurred if Yahoo is acquired by another company within the next two years, so the prospect of a takeover seems unlikely now.

Before the details of the Google partnership were announced, Yahoo and Microsoft said that talks between them had ended.

Yahoo issued a statement which said that, ‘after careful evaluation’ it had dismissed the idea of selling any of its business to Microsoft.

Yahoo CEO Jerry Yang said he expected the deal to be worth around $800m per year for the company, thanks to increased monetisation of its search pages.

Under the deal, part of Yahoo’s search ad inventory will be outsourced to Google, and the company can now display its rival’s ads in its search results pages, as well as on its other internet properties in North America. It will choose the search terms and the pages where Google AdSense ads will be shown.

The two search companies have agreed a ten year deal which will run for an initial four year term. After which Yahoo will have the option of extending the agreement.

A deal between the two was expected after the rejection of Microsoft’s offer, and a trial period in which Google search ads were served up on in the US.