Our analysis of the slew of mergers announced in the Internet space among the top 10 Web firms shows that the hunters offered an average $271 per unique user across the four deals. That contrasts with the $281 average for the top 10 sites in general.
On the high end in the urge to merger arena is @Home’s $6.7 billion stock swap for Excite at $404 per user. Low-end looks like Yahoo’s $3.6 billion stock swap for GeoCities. USA Network’s $6.6 billion bid for Lycos seems on par with the group, leading us to believe there’s a chance 50-50 that this could go through.
Merging Mania Value Per Users
|Hunter||Target||Offer (mil.)||Offer Per Unique User|
|@Home||Excite||$ 6,700||$ 404.88|
|AOL||Netscape||$ 4,200||$ 239.34|
|USA Networks||Lycos||$ 6,600||$ 250.19|
|Yahoo||GeoCities||$ 3,600||$ 189.70|
|average||$ 5,275||$ 271.03|
Along with a softer (or more sane) Internet stock market the value per unique user for the top 10 Web sites in the world lost a few points the past week, despite a slew of mergers that brought valuation out. WEBDEX shows a 2.1% fallout since February 10.
The defining deal now affecting Internet stocks, we think, is the FCC-approved $32 billion AT&T-TCI merger. We believe this redraws the Internet landscape, especially since both firms have Internet interests.
First, AT&T (NYSE:T) provides basic twisted pair dialup to the home through its WorldNet service, as well as backbone services to businesses.
WEBDEX, Web site User Value Index
|Internet.com’s||December||Feb 10||Feb 17||Feb 10||Feb 17|
1999 internet.com *pmv=estimated private market value for Web site only; users, media metrix note: Time Warner ranked 11th but #10 (Blue Mtn Arts) was an anomoly because of holiday e-greetings usage
Meanwhile, TCI (NASDAQ:TCOMA) owns the largest cable system in the U.S. and was an original investor and is currently a owner of a chunk of @Home (NASDAQ:ATHM), the cable Internet service provider.
@Home’s $6.7 billion bid for Excite (NASDAQ:XCIT), or $404 per unique user, adds content, commerce and girth to the equation. Add up AT&T, TCI, @Home-Excite and you have what we think is the potentially most powerful Internet player if not now then in 24 to 36 months, once the ink dries on these mergers and the synergies kick in.
That could leave AOL (NYSE:AOL), which made a $4.2 billion offer for Netscape (NASDAQ:NSCP).
To paraphrase Forrest Gump (of shrimp fame): investors do what insiders do. News that Softbank and senior executives at Yahoo sold shares recently sent YHOO shares down 9% since February 10, with the value per unique user going from $1,026 to $934.
But remember that when Yahoo announced its bid for GeoCities (NASDAQ:GCTY) January 28, YHOO shares went higher as Wall Street applauded the land grab.
On the day it was announced the deal had a $3.6 billion value, which would place GeoCities users at $189 each. February 17 they sat at $136, although we’re not sure if Yahoo’s bid has collars in it or what value per share it was based on.
The one lingering belief: consolidation of these companies does two things, draws out value and perhaps leads to a tighter range of value per unique user as they come together.
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