and AtomFilms have signed a merger agreement, that the companies say will create the world's leading next-generation entertainment company.

Under the terms of the agreement, is to acquire AtomFilms in a stock-for-stock deal. The deal will give AtomFilms shareholders a 30 per cent stake in the consolidated company. Macromedia CEO Rob Burgess is also the current chairman of, and he will chair the new company. AtomFilms CEO Mika Salmi will become CEO of, and AtomFilms chief marketing officer will become president.

Burgess said: "AtomFilms and were both created to pioneer new forms of consumer entertainment, and, to develop new business models for content creators. By joining the energies and talents of the two companies, we have the potential to change the way people are entertained throughout the world."

Salmi said: "We are building a new media company without equal."

The emerging company will combine AtomFilm's 1,500 short films and animations with's roster of shows, interactive games, music and creativity applications. AtomFilms' has access to 150-million viewers worldwide, has 30 million.

The deal is expected to be completed in the first quarter of 2001.