It had been rumoured for weeks that UK developer Lionhead Studios was up for sale, and now the rumours have been confirmed, with Microsoft announcing they have purchased the company.

"At Microsoft Game Studios we have worked hard to become the best partner for the best creative talent in our industry, and this acquisition underscores our commitment to excellence," said Shane Kim, general manager of Microsoft Game Studios. "Peter Molyneux is one of the few true visionaries in our industry, and his joining us is incredibly important to the future of both interactive entertainment and MGS. Lionhead is a shining example of the innovative and creative talent that has delivered some of the most influential and unique games experiences to date, and I am honored to welcome Peter and the incredible people at Lionhead Studios."

"We could not be more excited about being part of MGS. They have long supported our creative vision, and this teamwork resulted in the hugely successful 'Fable' franchise," said Molyneux, managing director of Lionhead Studios. "This acquisition gives Lionhead the stability and opportunity to focus on creating world-class next-generation titles. We are joining some of the most incredible game creators in the industry, the combined talent of which will truly take next-generation gaming to a new level."

With today's announcement, Lionhead Studios becomes the latest member of MGS, joining such prestigious and globally recognized game creators as Bungie Studios, Ensemble Studios, FASA Studio and Rare Ltd. on a team whose charter is to create exclusive entertainment experiences that differentiate Xbox 360 and Windows from other gaming platforms.

The studio will immediately begin work on Xbox 360 and Windows-exclusive titles. Lionhead was originally founded in 1997, with the first title "Black & White" being released to critical acclaim in 2001.