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Lycos up as merger nears
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September 1, 2000: 5:52 p.m. ET
As investors grow confident that Terra/Lycos deal will close, shares rise
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NEW YORK (CNNfn) - Shares of Terra Networks and Lycos rose strongly for the third consecutive day Friday as investors grew more confident in the completion of the Web companies' merger, now valued at $10.2 billion in stock.
Shares of Spanish Web service provider Terra's American depository receipts (ADRs) jumped $2.88 to close at $43 Friday, capping off a strong week which saw it post a nearly 22 percent gain in its stock price. Web portal Lycos was nearly as strong, closing up $3.63 to $74.63 Friday and finishing the week 13 percent higher.
David Joyce, analyst with Guzman and Co., said that despite some prolonged skepticism, investors became more confident this week that the merger would get done after Terra's majority shareholder, Telefonica, reiterated its commitment Tuesday to ensure Terra's ongoing $2 billion rights offering is fully subscribed. The rights offering is designed to provide Terra with the financial wherewithal it needs to complete the Lycos acquisition.
 Under the rights offering, Terra will offer $2 billion in new stock to its existing shareholders at $56.13 per share. Telefonica said it will fully subscribe its shares and buy any shares not purchased by other Terra shareholders.
"They still want to maintain the slight control they have in Terra in the newly formed company," Joyce said.
Telefonica reiterated its commitment to the rights offering in early August, but share prices continued to stay low.
Joyce said investors were concerned Telefonica would need extra cash to bid for European telecom licenses and would not follow through with the rights offering.
The all-stock deal is linked to Terra's share price, which has been creeping towards $45.37 -- a price at which the value of the deal would be at its maximum of $12.5 billion. As it stands now, 2.15 shares of Terra at the current share price makes the overall deal worth $10.2 billion, far higher than the $8.83 billion it was worth earlier this month. 
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Terra
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