RealTime IT News

CMGI May Not Support Lycos Deal

Lycos' largest shareholder Thursday threatened to pull its support of USA Networks' $45 billion buyout offer.

CMG Information Services, which holds a 20 percent stake in Lycos, said Thursday it will not vote to approve USA Networks' acquisition at current stock levels. The revelation represents an about-face for CMGI, which said it was "fully supportive" of the deal right after it was announced on Tuesday.

CMGI did not say what conditions the companies would have to meet for it to approve the buyout.

The news sent Lycos shares soaring 21 percent on Thursday, a sharp contrast to earlier in the week when the search engine's shares lost almost one-third of their value.

Under the original deal, Lycos shareholders will get about a 2 percent premium over Monday's closing price of 127-1/4. They will also get about 2.25 shares on the new company for each Lycos share they own.

Lycos shareholders will also receive preferred stock that can be converted to an extra 5 percent of common stock in the new company in three years --if the market cap of the new company reaches $45 billion.

Lycos Chief Executive Officer Bob Davis said Wednesday analysts and investors were confused about the deal which he said will create a company that will become a global e-commerce and media force.

Others who commented on the stock's drop attributed it to a widely-held view that Lycos didn't get enough of a premium. The search engine was believed to be talking with several media giants, among them NBC. Some say Lycos should have gone with another suitor that was willing to pay more.