has announced that it has reached an agreement to acquire the remaining shares in Lovefilm International Limited. The acquisition is subject to customary closing conditions, including regulatory approvals, and is expected to close in the first quarter of 2011.

Amazon and Lovefilm have been working together since 2008 when Lovefilm bought Amazon's DVD service. Amazon already had a significant minority shareholding in Lovefilm, but now it has agreed to buy the rest for an undisclosed sum.

Lovefilm is a leading European subscription entertainment service, similar to Netflix: it combines the benefits of online DVD and games rental-by-post as well as streaming films and TV shows instantly over the Internet to PCs, Internet-enabled TVs, and the PlayStation 3. The movie and game rental service currently has more than 1.4 million members in the UK, Germany, Sweden, Norway, and Denmark. This puts Amazon on a collision course to compete with Netflix, which currently operates in the US and Canada.

"The deal is a winner for the members who love Lovefilm because of its value, choice, convenience and innovation in home entertainment," Simon Calver, Chief Executive of Lovefilm International, said in a statement. "With Amazon's unequivocal support we can significantly enhance our members' experience across Europe."