Following a week of rumors, Yahoo! Inc. Thursday confirmed it will acquire Internet audio/video provider Broadcast.com Inc. in a deal worth an estimated $5.7 billion.
Yahoo! will issue .7722 of a share of Yahoo! common stock for each
share of Broadcast.com. All outstanding options of Broadcast.com will also be
converted into Yahoo! options. The acquisition is
subject to shareholder and regulatory approval and is expected to close by the end of the third quarter.
Wall Street was applauding the deal in early trading Thursday. Broadcast.com (BCST) was up 7-5/16 to 125-1/2 and Yahoo! (YHOO) was 3-11/16 higher at 172-1/16.
Yahoo! expects to record an unspecified one-time charge in
the third quarter to cover acquisition expenses. Officials expect the deal will begin contributing to earnings by the third quarter of the year 2000. However, they warned it will be a drag on profits until then. Yahoo! is one of the few Internet companies that is profitable.
Yahoo! officials said major Broadcast.com shareholders had already voiced their approval of the deal. That allows them to avoid problems that could delay the other recent large Internet merger — USA Networks’ purchase of Lycos.
Upon completion of the merger, Yahoo! will exchange about 28.3 million shares of Yahoo!
common stock for approximately 36.6 million shares of broadcast.com common stock. In addition,
Yahoo! will convert approximately 7.1 million broadcast.com stock options into nearly 5.5 million
Yahoo! stock options.
The marriage of the giant portal with the broadcaster will give Yahoo! a leading edge in the multimedia sector, and expose Broadcast.com’s streaming audio and video offerings to Yahoo!’s estimated 50 million unique users per
month.
Brown Brothers Harriman analyst Dawn Simon told Reuters the rush to broadband or high-speed Internet access
is driving companies like Yahoo! and rivals America Online Inc. and Lycos Inc.. to multimedia services.
“Yahoo has to satisfy its audience with new and original content – that’s where Broadcast.com comes in,”
Simon said in a telephone interview.
Yahoo! said that its content and business partners will be enabled with full turnkey audio and video streaming solutions. In addition, Yahoo!’s advertisers and merchants will have greater opportunities in promoting businesses
through the company’s Fusion Marketing Online integrated marketing programs, which includes
multimedia advertising and business services hosting opportunities.
“Broadcast.com’s tremendous first-to-market advantage has made it the leading destination on the Web
for audio and video broadcasts, and it will provide significant added value to Yahoo!’s audiences
worldwide,” said Tim Koogle, Yahoo!’s chairman and chief executive officer.
“The acquisition of Broadcast.com is a natural
extension of our strategy to deliver the ultimate experience to Web users and a powerful advertising and
distribution platform for both companies’ content, advertising and business services providers.”
“Broadcast.com has built a scalable digital distribution network designed to deliver streaming audio and
video to mass audiences, through any delivery mechanism or access device,” said Mark Cuban, Broadcast.com’s chairman
and president.
Todd Wagner, Broadcast.com’s chief executive officer said the deal will help broadcast.com extend its position as the Web’s leading Internet broadcaster.
“Combining
our Internet broadcasting expertise with Yahoo!’s position as one of the Web’s leading global branded
networks will enable us to extend our multimedia business services to an even larger customer and
audience base.”
Both Cuban and Wagner will continue leading Broadcast.com. They will report to Yahoo! president Jeff Mallett.
Standard & Poors analyst Mark Cavallone told Reuters the Broadcast.com acquisition is a strategic move that
ensure Yahoo remains viable in a broadband world. In a practical sense, it means users looking at stories
on its Web site will be able to see accompanying news video clips.
“It’s a deal looking to the future of the Internet as it evolves into a broadband medium,” Cavallone said.
Thursday’s deal follows Yahoo!’s Jan.28 $3.6 billion purchase of Web community GeoCities. That deal has is expected to close at the end of May.
