I think the unpopularity comes from the favoritism shown to USA Network in the deal structure. Lycos holders and Ticketmaster holders hate the deal, while USAI holders like it.
Here are my calculations about why:
Before the deal, Lycos had a market valuation of about $5.5B,
USA Network (including its 60% holdings in Ticketmaster) of about $6.7 B,
Ticketmaster (the part not held by USAI) had a market value of about $1.6B, while the whole of Ticketmaster had a market value of $4 B.
USA Network did not contribute all of its assets. Its hard to value the home shopping network and the internet assets of USAI, but its contribution of 60% of Ticketmaster is easier to value. Whatever USAI did contribute, it could not likely have been worth more than the $6.7 billion total market value of all of USAI.
Lycos holders get 30% of the company with a way-out-of-the money convertible as an additional benefit. Lets call the convert worth 0.3% of the company, just for calculations, so Lycos holders get 30.3% for $5.5 B in stock, paying about $182 million for each one percent.
Non-USAI Ticktmaster holders get 8.5% for their stock worth $1.6 B, paying $188 million for each one percent.
If USAI paid say $185 million for each of its about 61.2% of the company, they would be tossing in $11.3 B in market value. But the whole market value of USAI is only $6.7 B, so that can't be.
Just for calculations, lets say USAI tossed in $5B in market value assets, this would mean they got their CONTROLLING stake for only $82 million per percent! Good deal for them.
To make Lycos and Ticketmaster holder whole, there must me MORE than $6 Billion in synergies in this deal. Are there $6 B in synergies in this deal? Give me a break. Let's say there are a Billion in synergies, just for fun. So the value is $5B from USAI, $1B from synergies, $1.4B from independent Ticketmaster holders plus $5.5B from Lycos, totalling $12.9B.
Lycos holders get 30.3% or so, worth $3.9 B, a 29% haircut from yesterday's close, implying a Lycos share price value of $90 per share.
Ticketmaster holders get 8.5%, worth $1.1B, a 21% haircut, implying a Tickemaster share price value of $45 1/2.
USAI holders get 61.2%, worth $7.9B, plus they get to keep the stub of USAI, which, for convenience above, I guesstimated at $1.7B. So USAI holders have stuff worth $7.9B plus $1.7B, or $9.6B. This is 43% above the value at yesterday's close, which implies a price of $54 of so.
Today
Lycos closed at 94 or so, off 26%,
Ticketmaster (TMCS) closed at $42.25, off 27%
USAI closed at 41.625, up 10% or so.
That is why a bought a little USAI today.
Today's closing number don't exactly fit the calculations, but at least they follow the pattern.
All of this, needless to say, is just my opinion, and is based upon the sketchy numbers and facts immediately available to me. |
