July 12, 1999 13:55
FOCUS-Disney to buy rest of Infoseek, to spin off
Go
(adds executive comments paragraph 3, 6-7, 11-12; adds stock prices
paragraph 5)
By Nicole Volpe
NEW YORK, July 12 (Reuters) - Walt Disney Co. said on Monday it agreed to
buy the 57 percent of portal Infoseek Corp. that it doesn't own, and will create
a new Internet business called go.com.
Disney said it would combine its Internet holdings, which include Disney Store,
ESPN.com and ABCNews.com with Infoseek's search engine and other
Internet functions such as electronic mail.
"This will be the focal point for all of Disney's Internet-related activities," Disney
Chief Financial Officer Thomas Staggs said in a telephone interview. "As
bandwidth expands, Disney will be well positioned to take advantage our video
assets and creative abilities."
Newly created go.com, which will trade under its own stock symbol on the
New York Stock Exchange, is expected to have about $350 million in revenues
for the current fiscal year, on a pro forma basis.
In late Monday morning trade, Infoseek shares dropped $4.31 at $47.19 on
Nasdaq, while Disney shares were up 25 cents at $27.75 on the New York
Stock Exchange.
Staggs said there would be a significant goodwill charge associated with the
deal, and said the business would not be profitable in the near future.
He added that there was a possibility of job cuts due to the overlap of the
combined businesses, adding that the new enterprise would fundamentally be
a combination of the two companies and its 2,000 employees.
Infoseek Chief Executive and President Harry Motro will continue in the jobs
until the deal closes and through a transition period. Motro will then leave to
take some time off.
Staggs will lead a team to manage the transition until closing.
Disney last year acquired about 43 percent of Infoseek, and the two
companies created a family-oriented service, the Go Network, which includes
the ESPN sites such as NFL.com and NBA.com, Disney Store Online and
Disney Travel Online. Go Network is one of the top five sites on the Internet,
according to Internet market researchers Media Metrix.
Staggs said the company would seek to beef up the electronic commerce side
of the business by folding in the catalogue business to help support online
sales.
"The logic behind integrating the catalogue is that it is very leveragable online,"
said Staggs. "The catalog, with an expected $150 million in revenues this year,
gives us a proven list of buyers who use direct marketing."
In the transaction, each Infoseek share will be exchanged for 1.15 shares of
go.com.
After the deal, Disney will have about 72 percent of go.com.
The transaction, which requires approvals by Disney and Infoseek
shareholders, is expected to close by the end of the year, Disney said.
Infoseek and Disney jointly launched Go earlier this year as a new Internet
portal to compete with Yahoo Inc. , America Online Inc. and Lycos Inc. . But
several critics say they were slow to execute a clear strategy and hindered by
answering to two different management teams.
Disney stock has lagged as analysts have cut their ratings, citing sluggish
demand for Disney products. Shares of Infoseek had risen since June 8 on
speculation that Disney would buy the rest of the company.
Disney is not the only media company strengthening its position on the Web.
General Electric Co.'s NBC unit in May agreed to merge certain Internet
assets, including its Snap.com joint venture with CNET Inc. , with Xoom.com,
which will be renamed NBC Interactive.
((-- New York Newsdesk (212) 859-1700))
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