VeriSign said the acquisition will help it offer digital identification, transaction security and other services to Illuminet's telecommunications customers.
The all-stock deal is worth approximately $1.2bn (£0.82bn). Under the agreement, VeriSign will exchange .93 shares or options of VeriSign common stock for each outstanding share and option of Illuminet. The deal is expected to be completed in late 2001 or early 2002, pending approvals from the boards of directors of each company, Illuminet stockholders and government regulators.
Illuminet provides unseen services that allow telecommunications carriers to connect to one another to route and direct calls over networks.
Stratton Sclavos, president and chief executive of VeriSign, said: "Through this combination, service providers and enterprises will have the opportunity to use VeriSign's highly scalable data and voice infrastructure to deliver new services and to improve the speed and efficiency of their current offerings. This new integrated data/voice infrastructure will serve as the foundation for new types of services for the highly anticipated next-generation networks."
Roger H Moore, chief executive of Illuminet Holdings, said the combination of the two companies will open new opportunities for data and voice services, along with providing new revenue streams for the company.
VeriSign proposes to use its global infrastructure to push new services for Illuminet's customers, including secure short messaging, voice over Internet Protocol bridging and the ability to switch carriers and keep their old phone number - so-called local number portability.
Pete Lindstrom, an analyst at Hurwitz Group, called the move an infrastructure play that makes sense for VeriSign as it seeks to diversify its offerings.
"Security is part of the infrastructure, and they'll continue to build services" around it, whether they are Internet-based or otherwise, he said.
Illuminet earned $47.2m (£32.1) in revenue in the second quarter of this year and employs about 500 workers.