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$1.7B offer doesn't Excite
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May 21, 1998: 12:19 p.m. ET
One-time fish oil company offers to buy search engine for $72 a share
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NEW YORK (CNNfn) - Internet search engine Excite Inc. has rejected a $1.7 billion, unsolicited takeover proposal from Zapata Corp., a one-time fish oil and food processing company based in Texas.
In a letter, Zapata's Chairman Avram Glazer, who is the son of Tampa Bay Buccaneers' owner Malcolm Glazer, offered to acquire Excite -- one of six major search engine companies -- for $72 a share.
But Excite said the buyout proposal "holds no possible value to Excite's shareholders."
And Wall Street and industry analysts seem to agree with the Redwood City, Calif.-based company's assessment of the takeover proposal.
"Is there any intellectual asset they bring to the table? Clearly not. They are trying to ride on the back of some established brands," said Greg Wester, vice president of Yankee Group, a Boston-based consulting firm.
Investors gave the buyout plan a lukewarm response, in part because Zapata brings little to the table with the exception of cash, analysts said.
Excite's stock (XCIT) was up 1-7/16 at 61-5/8 at midday Thursday, far short of the deal's strike price. Zapata's stock (ZAP) was down 11/16 at 10-11/16 in recent trading.
Still, Zapata's stock has risen more than 40 percent since the beginning of the year. And analysts said the higher valuation will help finance its aggressive acquisition plans.
"Obviously these guys are really aggressive. They want to utilize their biggest asset, their stock price," said James Preissler, analyst at PaineWebber.
(Click to see historic stock activity)
Houston-based Zapata, which was co-founded by former President Bush, embarked on its aggressive expansion plan in April with the acquisitions of the "word.com" and "charged.com" web magazines.
Since then, Glazer has placed advertisements in major metropolitan newspapers and sent correspondence to the financial community, expressing their desire to "buy your website."
In a May 6 letter sent to analysts, Glazer said his company is debt-free and has about $425 million in cash and securities.
"There is no acquisition that is too large for Zapata to consider," Glazer wrote in the letter.
But with $1.3 billion in market value, Excite dwarfs Zapata, whose capital value is $250 million. In addition, Excite has extensive strategic alliances with companies such as AT&T Corp. and Netscape Communications Corp.
"Given the vast disparity in the market capitalization of Excite and Zapata, and the complete lack of synergy between the two companies' businesses, Excite believes that the proposal is not feasible," Excite said.
And PaineWebber's Preissler said he believes price apparently isn't an issue.
"The feel I've got is a lot of these guys are in for the long haul. If they wanted to sell out they could have sold out much earlier," Preissler said.
-- by staff writer Robert Liu
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