Fwd: Hey, Guess What! Somebody Bought Lycos!

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From: Ian Andrew Bell (ian@cafe.net)
Date: Tue May 16 2000 - 20:24:49 PDT

>Date: Tue, 16 May 2000 20:24:14 -0700
>To: foib@ianbell.com
>From: Ian Andrew Bell <ian@cafe.net>
>Subject: Hey, Guess What! Somebody Bought Lycos!
>Just so you know I'm still paying attention, even if I do need a slap with
>a clue noodle...
>Tuesday May 16 7:49 PM ET
>Terra Agrees to Buy Lycos for $12.5 Billion
>By Jessica Hall
>NEW YORK (Reuters) - Spanish Internet group Terra Networks SA
>(NasdaqNM:TRRA - news) agreed on Tuesday to buy U.S. Internet search
>company Lycos Inc. (NasdaqNM:LCOS - news) for $12.5 billion in stock, in a
>move to create one of the world's largest Internet companies and broaden
>its geographic reach.
>Lycos' novel online programming, as well as its youthful customer base,
>will help Terra turn its string of companies across Latin America and
>Europe into a World Wide Web powerhouse with broader global reach,
>industry analysts said.
>Lycos also will allow Terra, the fast-growing Internet arm of Telefonica
>de Espana SA (TRR.MC), to target the 30 million Spanish-speakers in the
>United States.
>The merger, which was widely expected, as well an expanded partnership
>with German media company Bertelsmann AG and a new wireless joint venture
>with Telefonica, will help the companies better compete against Internet
>industry leaders America Online Inc. (NYSE:AOL - news) and Yahoo Inc.
>(NasdaqNM:YHOO - news)
>``If your view of the world is that you need to be global, and you need to
>be in the U.S., then Lycos is a reasonable move,'' said Warren Thune, vice
>president for Mercer's Internet strategy group in Washington, D.C. ``Lycos
>has knowledge about how to grow quickly and compete in the U.S., and Terra
>has knowledge about targeting niche market and Spanish-speaking customers
>that Lycos could capitalize on,'' Thune said.
>Shares of Lycos surged about 60 percent in the past week in anticipation
>of the deal.
>Terra agreed to buy Lycos Inc. for $97.55 a share, Lycos' stock closed at
>72-5/8, up 11, on Nasdaq. Terra's stock fell 3-5/16 to 53-9/16 on Tuesday
>as investors feared that the acquisition may be too expensive.
>The combined company, which will be called Terra Lycos Inc., will have pro
>forma 2000 revenues of about $500 million and together have an estimated
>50 million unique users and 175 million page views per day. The company
>will have operations in 37 countries.
>``Our combination brings together many complementary strengths that we
>believe will enable Terra Lycos to generate consistently higher growth in
>revenues, cash flow and users than either company could expect to achieve
>independently,'' said Juan Villalonga, who is chairman of both Telefonica
>and Terra.
>Villalonga will head the merged Lycos-Terra. Robert Davis, currently Lycos
>president and chief executive, will be chief executive.
>Bertelsmann, Telefonica Play Significant Role
>As part of the merger pact, Bertelsmann, the third-largest media company
>in the world, agreed to purchase $1 billion of advertising, placement and
>integration services from Terra Lycos over five years.
>Terra-Lycos, meanwhile, will gain access to Bertelsmann's books, music,
>television, film and other media content, on preferred terms. This
>alliance builds on the existing Lycos-Bertelsmann joint venture in Europe
>-- Lycos Europe.
>``What will be interesting to see is what Bertelsmann can bring to the
>table, since that's who has the most impressive content,'' said Patrick
>Keane, senior analyst with research firm Jupiter Communications.
>Terra Lycos also will have access to all of Telefonica's media content.
>Telefonica is the largest broadcaster and the second largest
>pay-television operator in Spain and Argentina, where it also owns leading
>radio stations.
>Terra Lycos will also own 49 percent of a new wireless joint venture being
>established in partnership with Telefonica. Terra Lycos will gain access
>to Telefonica's extensive cable, fixed line, broadband, satellite and
>wireless networks, which now serve more than 60 million customers globally.
>The relationships between the companies could become even more
>intertwined. Bertelsmann Chief Executive Thomas Middelhoff said a new deal
>between Bertelsmann and Telefonica could be announced later this week or
>the beginning of next week. He did not elaborate.
>Terms Of The Deal
>Under the terms of the agreement, each Lycos share will swapped for $97.55
>of Terra ordinary shares, or their equivalent in Terra American Depository
>Receipts. The deal is subject to a so-called collar, which protects
>against a decline in Terra's stock price.
>Terra shareholders, including Telefonica, will own between 54 percent and
>63 percent of Terra Lycos, while Lycos shareholders will own the other 37
>percent to 46 percent of the combined company.
>As part of the deal, Telefonica agreed to underwrite a $2 billion rights
>offering by Terra. Upon completion of the offering, Terra Lycos will have
>more than $3 billion in cash.
>The Lycos acquisition continues Telefonica's Villalonga's track record of
>aggressively bidding on acquisition targets. Previous bold moves include
>its bid for Brazilian fixed-line telephone company Telesp and a 5.5
>billion euro all-share bid for Dutch television company Endemol
>Entertainment (EMOL.AS).
>The Lycos deal may help Villalonga regain investor confidence after
>Telefonica's failure to clinch a merger two weeks ago with KPN Telecom
>(KPN.AS) of the Netherlands, analysts said.
>Some Concerns About Deal
>While Lycos has been looking for partners or a buyer since its deal with
>Barry Diller's USA Networks Inc. (NasdaqNM:USAI - news) fell through last
>year, some analysts expressed caution on the Terra deal.
>Terra's stock, although down from a 52-week high of 145, is still seen by
>some analysts as overpriced. Terra has a valuation of $10,000 per
>subscriber, compared with less than $5,000 for industry leader America
>Online Inc. (AOL.N), Salomon Smith Barney analyst Lanny Baker said in a
>research report.
>Concerns about Internet access pricing pressure, customer turnover and the
>shift toward high-speed Internet infrastructure could muddy investor
>enthusiasm for the deal, analysts said.
>Terra Lycos will be listed on Nasdaq and Madrid's stock exchange. The deal
>is expected to close in the third quarter of calendar year 2000.

604.306.3615 http://ian.cafe.net

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