AOL to buy MovieFone in $388
million stock deal Message 7598368
By David Brinkerhoff
NEW YORK, Feb 1 (Reuters) - In the latest in a series of
online deals, America Online Inc. (NYSE:AOL - news)(AOL) on Monday said it will acquire
MovieFone Inc. (Nasdaq:MOFN - news), a dial-up movie ticket reservation service, in a stock
deal worth about $388 million.
AOL will purchase all outstanding shares of MovieFone, which sells movie tickets and lists local
film showings over the telephone. The company also offers tickets over the Internet.
The New York and Los Angeles-based firm is currently losing money and is unlikely to boost
AOL revenues, analysts said. But they said the online giant bought MovieFone to gain a foothold
in the ticket selling business, part of its ''Everywhere strategy'' to expand outside traditional
online territories.
''This is a nice, modest acquisition,'' said Abhishek Gami, analyst with William Blair, a
Chicago-based brokerage firm.
''It doesn't change the landscape in any particular way...it's a platform on which (AOL) can sell
other products or services.''
Under the deal, MovieFone shareholders would receive AOL stock worth $29.25 per share.
The exact fraction has not been worked out, but it will range between 0.1670 and 0.2259 of an
AOL share.
MovieFone has lost $891,000 through the first three quarters of 1998 amid revenues of about
$7.8 million, small compared to AOL's sales of nearly $1 billion in sales in the fourth quarter
alone.
What AOL sees, however, is the 100 million phone calls or website hits on MovieFone last year,
a goldmine for advertisers.
''MovieFone will add an exciting new area of local e-commerce to AOL and our other brands,''
Bob Pittman, AOL's President and Chief Operating Officer, said in a statement.
The move also parallels actions taken by MovieFone rival Ticketmaster Online, which in August
merged with CitySearch to form Ticketmaster Online-CitySearch Inc. (Nasdaq:TMCS - news)
and then went public amid high demand in the third quarter,
That deal combined the ticket sales service of Ticketmaster with CitySearch, which provides
local city guides on the Internet.
Under AOL'S deal, MovieFone will operate under the name AOL MovieFone and become a
key component of the company's online service Digital City, AOL said in a statement. Like
CitySearch, Digital City local information such a weather reports and entertainment schedules.
For MovieFone, the deal means fresh funding, 15 million subscribers, and use of AOL's much
larger telecommunications network, analysts said.
''MovieFone...can more cost-effectively run its services,'' Gami said. Analysts said they did not
expect any layoffs at MovieFone as a result of the acquisition.
AOL said it expected the transaction to be accounted for as a pooling-of-interests.
MovieFone's board of directors recommended that shareholders vote to go approve the
acquisition, and that the company's controlling stockholders have already agreed to vote in favor
of the deal, AOL said in its statement.
AOL shares ended $4.50 lower at $171.19 in New York Stock Exchange trading, while
MovieFone was up $1.50 at $26.50 on the Nasdaq.
More Quotes
and News:
America Online Inc (NYSE:AOL - news)
Moviefone Inc (Nasdaq:MOFN - news)
Ticketmaster Online CitySearch Inc (Nasdaq:TMCS - news)
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