Microsoft has just announced that it has reached an agreement to acquire Great Plains Software.

Microsoft’s acquisition of Great Plains will accelerate the success of small and medium companies globally with integrated, extensible business management software solutions needed to succeed in an increasingly interconnected economy. The acquisition will also create new opportunities for Microsoft and Great Plains partners to grow their businesses by delivering and integrating next generation solutions that take advantage of the powerful .NET foundation of small and medium business applications that Microsoft and Great Plains will provide.

The acquisition is structured as a stock purchase and is valued at approximately $1.1 billion. Each share of Great Plains common stock will be exchanged for 1.1 shares of Microsoft common stock. The transaction is subject to regulatory review.

“In 19 years of operations Great Plains has proved to be one of Microsoft’s most innovative partners,” said Steve Ballmer, President and CEO, Microsoft Corp. “Microsoft and Great Plains see the future of business applications for small and medium sized companies in the same way.”

“The combination of our two companies will accelerate small and medium business efficiency and agility by offering software solutions for automating interconnected business processes,” said Jeff Raikes, Group Vice President, Microsoft’s Productivity and Business Services Group. “Together we will bridge the gap between on-premise software and next generation software and services.”

“This combination of Great Plains and Microsoft allows us to dramatically accelerate our vision of being the leader in providing interconnected business management solutions to small and mid-sized customers, while staying true to our mission of improving the lives and business success of our partners and customers,” said Great Plains Chairman and CEO Doug Burgum.

Once the acquisition has been completed, Great Plains will become the Great Plains Division, reporting jointly to Jeff Raikes, Microsoft Group Vice President, Productivity and Business Services group, and David Vaskevitch, Senior Vice President, Business Application Division. The Great Plains Division will continue to develop, market and support its award-winning business management solutions which today deliver interconnections beyond the accounting and finance department to a company’s business community of employees, customers, suppliers and partners.

Down the road, the division will provide new capabilities that complement Microsoft’s online service for small companies, bCentral. Additionally, the integration of technologies from both companies will create a fully interconnected generation of business applications built on the .NET platform, accessed via a wide range of devices (such as PCs, terminals, handheld and wireless devices) and deployed either as web-based services (hosted applications) or as on-premise, locally managed solutions according to the customers business need, support requirements and customization requirements.