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Lycos holders OK merger
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October 27, 2000: 4:16 p.m. ET
The deal originally valued at $12.5 billion is now at $4.6 billion
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NEW YORK (CNNfn) - Shareholders of U.S. Web portal Lycos Inc. overwhelmingly approved their company's $4.6 billion merger with Spanish Internet service provider Terra Networks S.A. Friday, ending months of speculation about the completion of the deal.
More than 99 percent of the Waltham, Mass.-based Lycos' shareholders voted to approve the merger agreement, first struck in May. At the time, Terra's offer to purchase Lycos for $97.55 per share valued Lycos at $12.5 billion and represented a 60 percent premium for its shareholders.
Since that time, however, market fears that Terra overpaid for the No. 4 U.S. Internet portal and might have trouble raising the necessary funds to complete the merger have left shares of both companies reeling.
 Terra, a fast-growing but money-losing ISP, has seen its shares slide nearly 57 percent while Lycos shares, which traded at $76.63 at the time of the merger agreement, have shed more than 42 percent of their value.
That has left Lycos shares, based on Thursday's closing prices, valued at $41.67 per share, and reduced the transaction's overall value to $4.6 billion.
Still, investors continued a month-long rally in both company's stocks Friday, sensing that the transaction, which will create the world's No. 3 Internet service provider, may be nearing completion. That rally initially was sparked by the announcement two weeks ago that CMGI Inc. (CMGI: Research, Estimates), one of Lycos' largest shareholders, had decided to support the merger.
By midafternoon Friday, Lycos (LCOS: Research, Estimates) shares jumped $3.25 to $43.94 while Terra's (TRRA: Research, Estimates) American depositary receipts climbed $1.06 to $20.44.
Combined, Terra Lycos will offer the largest global reach of any Internet company, operating 122 sites in 40 countries around the world, company officials said. It also will offer more than five million subscribers access to the Web and own nearly half of a wireless joint venture with Telefonica Moviles.
In addition, Terra Lycos will begin operations with a $3 million cash war chest, aided in great part by a $2 billion stock rights offering completed by Terra during September. 
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Terra
Lycos
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