Google Inc. (NASDAQ: GOOG) said it agreed to buy Motorola Mobility Holdings, Inc. (NYSE: MMI) for $40 per share in cash or a total of about $12.5 billion. This might create more heat for Apple Inc. (NASDAQ: AAPL), as Google is trying to improve its Android ecosystem with this acquisition.

Google will get the benefit of the dedicated Android partner Motorola Mobility to supercharge the Android ecosystem and will enhance competition in mobile computing.

Motorola Mobility will remain a licensee of Android and Android will remain open. Google will run Motorola Mobility as a separate business.

"Motorola Mobility’s total commitment to Android has created a natural fit for our two companies," said Larry Page, CEO of Google. "Together, we will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers. I look forward to welcoming Motorolans to our family of Googlers."

The $40 per share deal is a 63 percent premium to the closing price of Motorola Mobility shares on August 12 of $24.47. The boards of directors of both the companies unanimously approved the transaction. The transaction is expected to close by the end of 2011 or early 2012.

The transaction offers significant value for Motorola Mobility’s stockholders and provides compelling new opportunities for its employees, customers, and partners around the world, Motorola said in a statement.

"We have shared a productive partnership with Google to advance the Android platform, and now through this combination we will be able to do even more to innovate and deliver outstanding mobility solutions across our mobile devices and home businesses," said Sanjay Jha, CEO of Motorola Mobility.

During the pre-market trading, Motorola Mobility stock jumped 60.2 percent to $39.20 on the NYSE. Google stock fell 3.32 percent to $546.60 on the NASDAQ Stock Market.