Lycos stock drops in wake of USA buyout

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Wall Street didn't respond warmly to Lycos' announcement that it would merge with properties from USA Networks. Its stock fell $33 to $94 1/4, in the midst of a general market sell-off. Yahoo! was also down $17 7/8 and Excite fell $8 a share. USA Networks' stock rose $3.69.

Under the terms of the deal, Lycos will merge with USA subsidiary Ticketmaster Online-CitySearch, (USA owns 60% of the TMCS) as well as with other USA Networks' interactive and e-commerce units, including Home Shopping Network and Internet Shopping Network/First Auction. The new company will be called USA/Lycos Interactive Networks. USA Networks Chairman, CEO Barry Diller will be chairman and Lycos President-CEO Robert Davis will be president-CEO and a member of the new company's board of directors. The combined company will have revenue of more than $1.5 billion, based on 1998 revenue figures.

Even though analysts praised the deal for expanding Lycos' reach and e-commerce power, some felt the deal shortchanged Lycos' shareholders. Lycos shareholders, who own a 30% in the new company, and Ticketmaster shareholders, who own 8.5% of the new company, can increase their ownership another 5% and 0.15% respectively if the initial USA/Lycos shares reach a market value of $45 billion over a specified period of time. Several analysts valued the deal at $18 billion according to Feb. 8 market close.

Copyright February 1999, Crain Communications Inc.

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