|
Is Lycos back in play?
|
 |
March 9, 1999: 5:34 p.m. ET
Lycos stock surges after Wetherell walks out on USA Networks deal
|
NEW YORK (CNNfn) - CMGI Inc.'s chief executive resigned from the board of Lycos Inc. Tuesday to protest the Internet portal's proposed merger with USA Networks, leading some experts to predict Lycos may be back in play.
Lycos (LCOS) surged 12-3/8 to 96-1/4 after David Wetherell's announcement. CMGI owns 20 percent of Lycos. CMGI fell 5-1/4 to 194-7/16.
Wetherell said he would fight the merger with USA Networks (USAI) because he considers the deal "inadequate."
In a statement, he said he wanted "to be free to explore the best options available to Lycos shareholders, including the possibility of Lycos remaining independent."
By resigning from the board, Wetherell could seek additional suitors or formulate a plan to keep the company independent without violating any fiduciary duties as a director. When the deal was originally announced last month, Wetherell voted in favor of the merger. But since that time, Lycos shares have fallen and Wetherell has told investors CMGI will not vote for the deal in its current form.
CMGI hired investment banker Morgan Stanley to press other shareholders for changes on the Lycos merger.
"Lycos is worth a good deal more than its value today," he said. "I still believe that pieces of the deal work -- it's the economics that don't."
After CMGI, the next largest Lycos shareholder is Fidelity Investments, or FMR Corp., which has about 7 percent of the stock. More than 20 percent of the stock is held by company officers and directors.
Lycos issued a statement saying that it would forge ahead with the deal, which links the portal with the Internet and e-commerce assets of USA Networks, including Ticketmaster Online-Citysearch and Home Shopping Network.
Can Wetherell do it?
This latest development in the Lycos-USA Networks saga has some analysts wondering if the merger will collapse.
"If I were a betting man," said Ullas Naik, senior vice president at First Albany Corp., "and they don't change the structure of the deal, there's a good chance it won't go through."
Naik said Lycos shareholders were never enthusiastic about the complex merger proposal and the company saw its stock plunge after the deal was announced.
"I think this is (Wetherell's) way of putting his foot down and saying 'we need to get more for Lycos shareholders,' " Naik said. "Now they have a nucleus of dissent upon which they can build."
Naik said Lycos could find another partner or be acquired somewhere down the road.
"It's still a premium property," he said.
Brian Hill of Adams Harkness noted that USA Network's chairman Barry Diller has gone on record as saying he will not renegotiate the deal. A spokesman for USA was not immediately available to comment on Wetherell's announcement.
"I think David Wetherell would have the support of a significant portion of the shareholders," Hill said. "He is very well known as an Internet guru. If he thinks this is not the best thing for investors, I don't think it would be difficult to convince other investors to fell the same way."
However, Andrea Williams of Volpe Brown Whelan said the deal still has a future.
"Strategically, most people will actually say it's a good deal," she said, noting that Wetherell himself had voted for it. "In the short term, David Wetherell and perhaps some others feel they're not getting valued like an Internet company. Lycos needs a strong strategic partner with deep pockets to compete."
Williams said other possible merger partners are NBC, a division of General Electric (GE), which, she said, had extensive discussions with Lycos in the past. She also mentioned Time Warner Inc. (TWX), the parent company of CNNfn, and German publishing giant Bertelsmann.
Williams said that Lycos could return to some of the other companies it had meet with before hooking up with Diller and try to re-kindle some interest.
"They could go back, but they've lost some negotiation leverage," she said. "It's a bit of an uncomfortable situation."
USA Networks finished down 13/16 at 37-11/16.
--with staff and wire reports.
|
|
|
|
|
|
Lycos
USA Networks
CMGI
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
