NEW YORK (CNNfn) - USA Networks Inc. may abandon its contested bid for Lycos Inc., leaving the Internet portal to search for a new partner, according to a report published Monday.
The deal has been dogged by strong opposition from Lycos (LCOS) shareholders since the companies announced the transaction in February.
An agreement has been hampered by an ongoing dispute between Lycos founder David Wetherell and USA Networks (USAI) Chairman Barry Diller. Wetherell stepped down from the Lycos board to fight the deal through CMGI Inc. (CMGI), which holds about 20 percent of Lycos stock.
Despite the turmoil surrounding the merger, Lycos Chief Executive Officer Robert Davis said he expected to win shareholder approval of the deal. A shareholder vote was scheduled for July.
Analysts, however, said Lycos' shareholders weren't sold on USA Networks' plans for the company.
Whereas Lycos would contribute all of its assets, USA Networks planned to combine its holdings in Tickemaster Online-CitySearch and the Home Shopping Network with Lycos' Internet portal.
"The deal was terrible for Lycos shareholders," said Bruce Smith, an analyst at Jefferies & Co.
"USA Networks is trying to transfer non-Internet assets into the new entity. They made up these numbers to give the appearance they were paying $130 a share. But when you take away the non-Internet assets, the deal is really worth about $70 a share. What do Ticketmaster and Home Shopping Network have to do with the Internet?"
Lycos investors reacted positively to the news, which first appeared in the Wall Street Journal. Lycos shares were up 9 at 98-1/2 in morning trade.
USA Networks still may seek to sweeten its offer ahead of a Lycos stockholders' vote in July but so far has rejected such a move, according to the Journal. However, the newspaper said the media group may hold fire and swoop later should Lycos' stock price fall.
But Smith said that situation is unlikely.
"Assuming this is true, Lycos goes its own way to do what it needs to do to survive," he said.
USA Networks shares were up 3/16 at 35-9/16 in morning trade. CMGI shares were up 6-1/4 at 227-1/2.