unveiled plans to merge its non-U.S.
operations with Dutch ISP chello
broadband to form Excite Chello, valued at nearly $5.1 billion. The
merger deal creates a combined user base of over 300,000 subscribers in 15
countries and boasts a global IP backbone.
Chello is the sibling of Dutch cable giant United Pan-Europe
. [email protected]’s overseas portal and media
ventures will be rolled into chello’s broadband Net access services. The
newlyweds also have plans to combine [email protected]’s TV set-top box
technology with chello’s exclusive rights to introduce set-top services to
its UPC parent’s nearly 11 million wired homes.
The merger is expected to wrap up sometime later this year, and under the
terms of the deal, [email protected] and UPC will sink $100 million apiece into
Excite Chello in exchange for joint interest in the new company. Meanwhile,
subsidiary, Liberty Media
, will contribute a $200 million loan to the new venture which
can later be cashed in for shares of Excite Chello. [email protected] skipper
George Bell and UPC’s top banana Mark Schneider will assume co-chairmen
roles with Excite Chello.
For the most part, this deal is in response to two failed IPO attempts for
chello. Goldman Sachs had a whale of a time trying to convince investors to
swallow the broadband ISP’s $350 million offering. The irony here is that
much of the lukewarm response can be traced to the crummy aftermarket
performance of the merger between Excite and @Home this time last year.
Burned investors still holding the bag from the pipes and content marriage
have generally soured on portly broadband ISP deals. Consistent with its
past performance, shares of [email protected] limped ahead $0.12 higher on
marginally heavier than average volume, following news of the deal.
Despite [email protected]’s sluggish stock performance or chello’s evaporated
hopes for a solo IPO, plans are already in the works to float 10% of Excite
Chello in the new issues market by late this year or early next. Now the
beefiest broadband ISP outside of North America, signs for a successful IPO
Aside from competing with nascent broadband initiatives from Euro-carriers
like Deutsche Telekom’s
T-Online and France
Wanadoo, spun off in a frothy $2 billion
IPO yesterday, Excite Chello laces up the gloves for a showdown with
Europe, and Yahoo
The meat and potatoes of the competitive landscape are starting to take
shape in what will be a global battle over mindshare for content
piggybacking on broadband. But make no mistake, the obvious frontrunners
here are still America Online and Yahoo! with a pair of, hands down, the
most recognizable brands domestically and abroad. While it’s still too
early to tell which blue chipper lands on top, this deal looks like a big
improvement for chello’s uncertain market position and a badly-needed boost
for [email protected]’s modest overseas initiative.
Any questions or comments, love letters or hate mail? As always, feel
free to forward them to [email protected].
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