Update: Virtual Globes’ Alan Glennon has the official word.
Update 2: Microsoft shared this statement:
Microsoft has entered into an agreement with Vexcel Corporation to acquire the company. The acquisition is part of Microsoft’s exciting vision to deliver a dynamic, immersive digital representation of the real world that provides the best local search and mapping experience to consumers, businesses and government. Vexcel’s people, products, and services will play a key role in helping Microsoft deliver on this vision. The agreement requires regulatory approval in the United States and in certain EU countries (Germany and Italy), and more details will be provided once the deal is closed.
Update 3: Microsoft VE blog says the papers were signed last week.