For much of the last two years, ardent shareholders of Internet domain name powerhouse Network Solutions Inc. (Nasdaq: NSOL) have watched the rumor wires closely for takeover talk -- and there has been plenty. Few, though, saw today's news coming: Internet security software company VeriSign (Nasdaq: VRSN) agreed to buy the company for approximately $21 billion in stock.

VeriSign plans to swap 2.15 shares of its common stock for each share of Network Solutions Inc. (NSI). Using last night's closing prices, that values NSI at a hair under $532 per share, a 48% premium. The transaction is expected to close in the third quarter.

This deal weds two companies that have a working history that goes back a few years, the pair teaming up to develop NSI's "dotcom directory" of online businesses, among other things. Some investors might recall a 1997 pact to market a combined domain name and secure online transaction certificate package to would-be e-commerce players; that partnership may have been what started the wheels turning toward today's announcement.

"We believe that services over the Internet is a strategic play," VeriSign CEO Stratton Sclavos told Bloomberg Television. "Both companies have the data centers built and the global networks being deployed... and once the infrastructure is in place you can add more services at a relatively low cost. We will add more services on."

NSI CEO Jim Rutt will stay with the combined company and report to Rutt from his current capacity.

That VeriSign was looking to grow through acquisition shouldn't surprise anyone, nor should its willingness to shell out large portions of its equity. "I wouldn't be surprised if this isn't the last deal that we do," Sclavos double-negatived. For a quick trip down memory lane, click here for a Foolish take from December in which we discuss the company's purchase of two privately held e-commerce companies. Now it's expanding its footprint even further by selecting NSI as a driver of future cash flows and future customers.

The massive premium VeriSign paid for NSI also probably shouldn't surprise anyone since it is picking up a business that is tops in its space and generating loads of cash. (Click here for more on that story.) And this deal, strategically, appears to make lots of sense since it unites two high-growth, first-tier providers of essential e-commerce services: a Web presence and the means for secure transactions. Since NSI has been trying to expand the services it sells to users for some time, it's a good fit for both. For a complete list of what the combined companies intend to offer, click here.

As for the price paid? VeriSign didn't get into projections of the deal's financial impact, but since it expects to add more employees in a play to better spread the gospel, it's probably safe to expect operating expenses to come under fire in the near term. How much fire is unclear, though both were profitable in 1999.

"The revenue growth... is going to be dramatic," Sclavos said on the telly. "We believe the combination will accelerate the combined revenue growth of the companies as we put the services together."

Still, given that the combined companies will boast a balance sheet rich in cash and investments -- yet free of long-term debt -- it seems likely that they will be able to weather most any storms encountered during the integration progress.

Related Links:

• VeriSign website
• VeriSign message board
• Fool Plate Special, 2/10/00: Network Solutions Girds for 2000
• Fool News, 12/20/99: Verily, Verily, VeriSign Reaches New Heights