Lycos, Terra Networks Reportedly Considering Alliance

Rumors of alliance talks between U.S. portal giant Lycos Inc. and Spain’s rapidly-growing ISP and content provider, Terra Networks, were flying Friday, following a report of the talks in the Spanish financial daily, Expansion.

Terra , in a filing to Spain’s National Securities Market Commission, said talks were ongoing with Lycos but there was no definitive agreement and no guarantee that an agreement could be reached.

Lycos spokesman Dawn Rowan refused comment on the talks.

The Spanish newspaper said the talks could lead to a merger. Stock market regulators chose to halt trading in the ISP’s shares after share prices surged 6.3 percent following the newspaper report. Share prices settled about 3 percent higher, at 65.6 euros, by 11:30 a.m. GMT. That company valued at about 18 billion euros, is about three times the size of Lycos, valued at about $6 billion, by market capitalization.

Terra — a subsidiary of Spanish telecom operator Telefonica and Europe’s biggest listed Internet company until recently — operates in both Latin America and the Iberian peninsula. It provides Internet access to about 1.3 million consumers and small businesses and also operates portals and provides online advertising and marketing, e-commerce, and Web design and hosting services. A merger between it and Lycos could create a global Internet group with market capitalization of about $22 billion. Only global players America Online Inc. and Yahoo! Inc. would be larger.

Earlier in the day, Terra reported it lost $63.31 million in the first quarter although revenue rose to 37 million euros, a 125 increase from last year’s first quarter. The company also said subscriber numbers grew strongly.

According to Reuters, analysts expect Lycos shareholders would demand a premium of 25 to 30 percent in any takeover by Terra.

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