some news........
Wednesday, March 10, 1999
Lycos shares surge on CMGI talk
By Larry Barrett
March 10, 1999 12:45pm
ZDII
With each passing day the Lycos-USA Networks merger appears destined to be renegotiated or scrapped altogether. And it's this conventional wisdom that keeps boosting the portal's stock price. Lycos shares were up another 13 percent Wednesday.
Lycos (chart) jumped up 12 9/16 to 108 13/16 Wednesday afternoon.
Whether Internet incubator CMGI Inc. (Nasdaq: CMGI) steps in and buys the 80 percent of Lycos (Nasdaq: LCOS) it doesn't already own or if another suitor such as NBC or Time-Warner jumps into the fray, Lycos shareholders are sitting pretty.
On Wednesday, BancBoston Robertson Stephens analyst Keith Benjamin reiterated his "buy" recommendation on Lycos shares.
"We reiterate our buy rating as continued confusion surrounding the USAI deal creates a compelling risk/reward opportunity for investors," he said in a research report. "We continue to like the strategic aspects of the proposed USA Lycos Network and believe it has a better chance of growing into its valuation than does Lycos alone."
The proposed $22 billion merger between Lycos, USA Networks and Ticketmaster-Citysearch Inc. (Nasdaq: TMCS) was widely panned by the investment community. Lycos shares quickly fell from about $127 a share to less than $80 a share in less than a week.
This dramatic decline rankled CMGI officials who had hoped to see a healthy premium above Lycos' current stock price.
CMGI CEO David Wetherell resigned Tuesday in protest to what he thinks is an unfair purchase price. He wants more dough. He floated the idea to The Wall Street Journal that CMGI may be interested in buying Lycos.
A CMGI-Lycos merger wouldn't be that far-fetched. Thanks to its incredible stock performance, it's entirely possible that CMGI could make a better offer for Lycos.
Then CMGI can direct Lycos' considerable traffic toward its other Internet companies and investments. And, by the way, CMGI would actually report a smaller operating loss by purchasing Lycos this year.
Buying Lycos would also get CMGI out of a jam with the Securities and Exchange Commission. Too much of CMGI's income comes from investments and it is nearing the threshold where it has to register as a mutual fund.
"They have a one-year window to buy a company to dilute their holdings or sell off assets or they have to register as a mutual fund," said Brian Hill, an analyst at Adams Harkness.
Of course, Wetherell may be bluffing. Or USA Networks could renegotiate the deal. It's all terribly uncertain at this point. The only certainty is the longer Lycos is perceived to be in play, the higher the stock will rise.
"We believe the most likely outcome is that the deal between Lycos and USAI closes either under present or re-negotiated terms," Benjamin said. "Of the potential scenarios, we believe most point to a higher price for the stock eventually."
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