Ending recent speculation, Lycos Inc.,
USA Networks Inc.
and Ticketmaster Online-CitySearch,
Inc. confirmed Wednesday that they have agreed to end their merger.
“It’s time for Lycos to move on,” said Lycos Chief Executive Officer Bob Davis.
The alliance agreement announced Feb. 9
called for Lycos to integrate with USAi property Internet Shopping Network/First Auction and
Ticketmaster-Online CitySearch Inc.
The union faced several obstacles, most notably the opposition of Lycos
shareholders, who wanted a better price for shares. The largest Lycos
shareholder, venture fund CMGI Inc., sought to block the deal claiming
Lycos shareholders could have gotten a better deal.
In a brief statement issued Wednesday, CMGI Chairman David Wetherell
supported the companies’ decision to call off the merger.
“We are gratified that Lycos shareholders will now have new avenues to realize
appropriate value for their shares,” Wetherell said.
During a press conference Wednesday, Davis described his relationship with
Wetherell as, “cordial, friendly and respectful,” but added that Wetherell
won’t be back on the company’s board of directors.
Just days after the merger announcement, Lycos shares dropped sharply, with disgruntled investors selling off shares of Lycos stock. The merger had been valued at approximately at between $17
billion to $18 billion.
“A lot of people misjudged the transaction,” Davis said. “I did and Barry
Diller and others did.
“Despite the controversy of the merger, it was an exceptional period for
the company, during which we achieved several milestones,” Davis said.
He also said the company’s fiscal third quarter results, due out next Tuesday, would reflect the company’s growth and said investors could “expect a solid
quarter.”
The companies announced Wednesday that the option agreement between USA
Networks and Lycos, also part of the merger agreement, has been
terminated.
Provisions of the termination agreement require Lycos to pay USAi and
Ticketmaster-CitySearch $35 million if Lycos reaches a deal with another
party before July 15.
Also, subject to certain exceptions, USAi
and Ticketmaster-CitySearch each have agreed that until July 15, neither
will acquire Lycos
stock or make any proposals to acquire Lycos.
As part of today’s news, USAi, TMCS and Lycos
announced an agreement in which TMCS and Lycos will enter into a
distribution and commerce relationship.
Under that alliance, CitySearch will provide local content for Lycos’
national network, Ticketmaster
Online content will be featured on Lycos sites and links will be provided
to the Ticketmaster Online-CitySearch site.
The companies said they are investigating additional options in developing
a cooperative program to create a local commerce platform for the 15,000
businesses hosted by CitySearch
and its partners.
In addition, the agreement calls for USAi and Lycos to
exchange cross-promotional initiatives involving the Lycos sites and USAi’s
media assets.
Davis dismissed the idea that Lycos would partner with another company any
time soon.
“The lesson I learned during this process is that speculation is a
dangerous thing. We’re going to concentrate on building up business.”
On that front, Davis said new acquisitions are imminent for Lycos.
“We’re looking at a number of things, but nothing’s final. You can be
clearly looking for us to be aggressive on that front. We’re looking at
companies that will help us build audiences, furthering our reach in
traffic, and also commerce companies.”
Also on the horizon for Lycos is that by late summer or early fall, the
company becomes “poolable,” Davis said. Currently CMGI’s ownership stake is about 18 percent of Lycos. CMGI previously held a 50 percent stake in the company, and therfore it could not use the pooling of interest accounting method. There is a
two-year waiting clause for companies to pool interests if a majority
company owns another company and spins it off. Since pooling of interests
enable companies to combine their results without denting future earnings,
some analysts predict Lycos will emerge as an attractive take-over entity
once it is poolable.
