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.