City Guide Pulls Plug on IPO in Favor of Merger
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CitySearch, which produces and delivers local U.S. city guides on the Web, said its board put the planned initial public offering on hold after receiving a proposal to merge with Ticketmaster, an opportunity the company said was too good to pass up. An IPO is planned for the combined company following the completion of the merger, however.
Financial specifics of today's alliance were not disclosed, but Internet Stock Report's Steve Harmon targets the combined entity at a value north of $1 billion given TicketMaster's strong monthly sales, market position, brand, and access to capital. CitySearch's part of that could be $300 million, right in line with its IPO market valuation goals.
Harmon added that TicketMaster-CitySearch will be in a position to consolidate other entertainment and event Web sites and services when it goes public as a well-rounded offering in the future.
The Pasadena, CA-based city guide said today's deal will form Ticketmaster Online-CitySearch, a company with strong positions in original local content, local advertising, and electronic commerce.
The new entity is aimed at combining the localized information services of CitySearch with the electronic commerce business model and ticketing power of Ticketmaster. CitySearch currently competes with localized versions of Yahoo!, Lycos, and Excite, as well as AOL's Digital Cities.
Under the merger, former CitySearch shareholders will own 42.5 percent of Ticketmaster Online-CitySearch, and when USA Networks Interactive's (USAi) current ownership of CitySearch is taken into account, USAi will own 62.5 percent.
CitySearch said USAi invested $50 million in a convertible debt security to fund the online guide's expansion until the initial public offering is completed.
The transaction is subject to standard regulatory approval and CitySearch shareholder approval. It is expected to be completed in this year's third quarter.
Ticketmaster and CitySearch will still retain their individual presences on the Internet while collaborating on the new company. Ticketmaster Group will provide all ticketing services for the new company, and will continue relationships with current clients.
Charles Conn, CEO of CitySearch, will be the CEO of Ticketmaster Online-CitySearch, and Alan Citron, President of USAi, will become Chairman.
"From the standpoint of CitySearch's IPO, the strategic benefits of the merger are even more compelling than the prospect of pursuing an independent path as a public company. The logic of this combination was too attractive to pass up," said Conn. "By joining consumers' local information gathering with ticketing, the new entity presents a unique value proposition to both local advertisers and users, as well as our shareholders."
"We look forward to Ticketmaster Online's continued service as our exclusive worldwide Internet vehicle for ticket sales," said Terry Barnes, CEO of Ticketmaster. "By partnering with CitySearch, we have expanded the audience for Ticketmaster events on the Internet, benefiting both our clients and our customers."
Ticketmaster Online said its ticket sales have risen from $100,000 to $10,000,000 monthly in the past 21 months.
In addition to USAi, CitySearch counts Goldman Sachs, Times Mirror, the Washington Post Company, American Express, Intel, and Compaq among its investors.