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Terra bullish on Lycos deal
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August 2, 2000: 10:12 a.m. ET
Spanish Internet firm pledges to close deal, rights offering despite skepticism
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NEW YORK (CNNfn) - Spanish Web service provider Terra Networks said Wednesday it will close its $8.83 billion ( 9.66 billion) acquisition of U.S. Web portal Lycos by the end of October, brushing aside concerns raised by investors, who already have shaved 30 percent off the deal's value.
In a short statement, Madrid-based Terra said its majority shareholder, Telefonica SA, has reiterated its commitment fully subscribe a $2 billion capital rights offering in September -- meant to help provide the online company with some cash prior to the acquisition -- if any shares are not purchased by stockholders.
That scenario is becoming more likely as investors continue to express increasing skepticism about the deal.
Lycos (LCOS: Research, Estimates) shares, which the deal initially valued at $97.55 each, have fallen 4 percent since the acquisition was announced in May, primarily because Terra (TRRA: Research, Estimates) shares have plunged during that period, extending their rapid retreat that started in February.
 Terra's American depositary receipts shed 1 to 37-3/16 Tuesday and are now 34 percent below their value when the deal was announced. That level would value Lycos' shares at $79.95 per share.
Still, Terra and Telefonica, which owns Spain's and Latin America's largest telecommunications concern, said they expect the merger to close following Lycos' shareholder vote in mid-October. They also said they expect to obtain the necessary regulatory approvals by then.
Analysts largely have panned the deal from Lycos' perspective, saying it gives the No. 4 U.S. Web portal a presence in Spain and Latin America, but little more.
However, the deal has viewed as a solid one for Terra, a fast-growing but money-losing Internet provider, which gains a solid foothold in the United States as well as entry into several top European markets. Still, some analysts remain concerned that the company has yet to show how the combination will make money.
The combined company, to be called Terra Lycos, would have revenue of $500 million this year, an estimated 50 million unique users, and operations in 37 countries in North America, Latin America, Asia and Europe.
Terra shares continued their retreat shortly after the opening bell Wednesday, falling 3/16 to 37, while Lycos lost 11/16 to 58-5/8. 
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