OK Compaq were ready! :-)
CMGI inks AltaVista deal
In $2.3B buyout of search engine, CMGI
weds its fortune closer to Compaq
June 29, 1999: 1:09 p.m. ET
NEW YORK (CNNfn) - Internet investment firm CMGI
Inc. said Tuesday it would buy Web search engine
AltaVista from Compaq Computer Corp. for $2.3
billion, part of a wider deal that closely links the two
high-tech companies' futures.
Finding a new home for AltaVista has been a goal
of Houston-based Compaq, whose leadership in the
personal computer market has come under intense
pressure in recent months.
Aside from that swap for AltaVista, the deal ties
together the fortunes of CMGI and Compaq. CMGI
will land AltaVista-related web sites Shopping.com,
an online retail site, and Zip2, a web directory.
The deal puts AltaVista in the hands of an expert
Internet company, but allows Compaq -- which had
planned to take the search engine public -- to keep
one foot planted in the Internet space.
That's because the deal gives Compaq a 16.4
percent stake and a board seat at CMGI, and a
17-percent stake and a board seat in AltaVista.
With its leadership in PCs coming under fire,
Compaq is reeling. The company in April ousted
Chief Executive Eckhard Pfeiffer and recently said it
would post a loss this quarter.
For CMGI, fresh off scuttling a buyout offer for its
top asset - an 18 percent stake in the web portal
Lycos (LCOS) -- the deal cements its status as a
independent Internet operating company.
U.S. Securities and Exchange Commission rules
have put CMGI, whose assets include many stock
holdings, on the brink of being listed by the SEC as a
mutual fund -- and not an operating Net company.
"The threshold in assets for companies,
generally, is about 40 percent," to avoid being
considered a mutual fund, said John Heine, an SEC
spokesman.
The deal with AltaVista, which is not publicly
traded, should add the concrete assets for CMGI to
maintain its operating company status.
By the numbers
In the accord, which was anticipated after reports
last week, CMGI will receive a 83 percent stake in
AltaVista. Compaq becomes the search engine's
largest outside shareholder, holding the other 17
percent.
Also as part of the deal, Compaq will receive 19
million common shares and preferred shares worth
1.8 million common shares of CMGI, giving the PC
maker a 16.4 percent ownership in the Net venture
firm and a seat on the CMGI board.
Based on CMGI's Monday closing price of
$97.6875, the stock portion of the transaction carries
a value of more than $2 billion. CMGI will issue a
$220-million, three-year note to Compaq, lifting the
deal's total value to about $2.3 billion.
Investors appeared to log on to the deal. CMGI
(CMGI) stock was up 13-5/16 to 111 on Tuesday
afternoon, while shares of Compaq Computer (CPQ)
rose 1 to 23-5/16. |
