Xoom.com to partner with Snap, NBC
By Thom Calandra, CBS MarketWatch
Last Update: 9:02 AM ET May 10, 1999 StockWatch Chat
SAN FRANCISCO (CBS.MW) -- Xoom.com Inc., the community Web site, will announce it is merging in a three-way transaction with CNET's Snap Internet service and Web assets owned by General Electric's NBC.
The new company, NBC Internet, will be the seventh largest Web site, executives close to the companies said.
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Updated:
5/10/99 6:56:48 AM ET
The San Francisco-based Xoom (XMCM: news, msgs), which just raised $130 million in a secondary stock offering on Nasdaq, will represent a third of the new company, which will trade as a new security, executives close to the transaction said.
The announcement of the stock and asset transaction will come Monday morning. Executives at the companies later confirmed the merger transaction and scheduled a telephone press conference.
NBC (GE: news, msgs) already owns a stake in CNET's Snap service. The transaction gives NBC and Snap (CNET: news, msgs) a distribution network of millions of Xoom subscribers, who use Xoom to build free Web sites.
Snap sees itself as a gateway to sophisticated Web content. NBC, meanwhile, has been eager to reach more viewers with its television and Internet programming, which includes the financial channel CNBC.
Xoom shares rose 10 percent Friday to 75 1/8. Sources close to the transaction said the new security is expected to trade at 20 to 25 times year 2000 sales. Executives close to the transaction said they expect Xoom shareholders to receive a premium for their stock in this stock and asset swap.
In pre-trading Monday, Nasdaq market makers indicated an opening price of 85 to 90 for Xoom shares. Xoom shareholders will own 34 percent of the new company, and NBC will own 49.9 percent, with the right to increase thjat to about 53 percent, executives at the companies confirmed Monday. CNET's Snap service will own 13 percent of the new entity, which the executives called "a pure Internet play."
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Xoom shares represent $1.2 billion of market capitalization. The company says it has attracted more than 7.3 million members to the free service.
In a presentation to fund managers in April, Xoom chairman and co-founder Chris Kitze said the service reaches 28 percent of Web surfers yet enjoyed brand recognition of just 3 percent. "There's a major disconnect," he said.
The company, which came public in December, plans to increase its recognition through a radio campaign in major U.S. cities. The goal, according to Kitze, is to convert registered users to buyers at the site. Currently, only about 80,000, or 1 percent, of members purchase items via Xoom.com.
In its most recent quarter, Xoom.com posted a first-quarter loss of $3.3 million, or 24 cents a share, two cents better than a consensus of analysts polled. Quarterly revenues grew to $4.4 million, up 421 percent from the year-ago period and up 28 percent from the previous quarter.
AOL Live Market: Thom Calandra talks markets, stocks and the economy on America Online's Live Market Chat, each Friday at 2:30 p.m. ET. Sage Online runs the discussion
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