Allen to Buy Controlling Stake
In Go2Net for About $750 Million
Billionaire investor Paul Allen agreed to buy a controlling stake in Go2Net
Inc. for about $750 million, a deal that adds a Web portal to Mr. Allen's
plans for high-speed Internet services.
Mr. Allen will invest $300 million in newly
issued convertible preferred stock and plans
to buy $450 million of existing common stock
at $90 a share. If the deal is successful, Mr.
Allen will have a slim majority stake.
Mr. Allen has been assembling a portfolio of
cable, entertainment and other new-media
assets. Last year, he purchased Charter
Communications Inc. and Marcus Cable Co.,
which combined make up the seventh-largest
cable company in the U.S., reaching 2.4 million customers.
He has said publicly that he expects all those technologies to be
interconnected and that cable systems will play a critical delivery role in
what he calls the "wired world." The cable-TV infrastructure can be used
to deliver Internet access at speeds dwarfing those offered by traditional
dial-up modems.
In a statement Monday, Mr. Allen said that "portal services such as
Go2Net delivered directly to set-top boxes will be a critical component in
the future of cable."
Go2Net said the investment will help fund Go2Net's expansion, as it tries
to establish its brand name and add content and services. Chief Executive
Russell C. Horowitz and the company's existing management team will
continue to manage the company and lead its strategic expansion.
Soaring Shares
Go2Net, based in Seattle, is one of a handful of a second-tier portal sites
that have been overshadowed by giants like Yahoo! Inc. and Excite Inc.
But as the top Web sites have been bought by large media firms, shares of
Go2Net have soared on hopes it could be next: Earlier this year, the
shares traded as high as $98, up from a 52-week low of $6.4063.
Go2Net owns several popular Web sites, including Silicon Investor
(www.techstocks.com), the popular investing community site, and
MetaCrawler (www.metacrawler.com), a search engine that queries and
gives results from all of the major search engines. In January, the Go2Net
announced plans to acquire Web21, a firm that provides rankings of the
most-popular Web sites.
In Monday's deal, Mr. Allen agreed to buy $300 million of convertible
preferred stock of Go2Net, convertible into approximately 26% of
Go2Net's common stock. About $165 million of the convertible preferred
stock was purchased Monday, with the remaining shares to be purchased
upon shareholder approval, Go2Net said.
Mr. Allen also agreed that Vulcan Ventures Inc., his investment
organization, would launch a tender offer to purchase up to 3.6 million
shares of common stock at $90 a share by Friday. Also, Go2Net
managers and directors entered into agreements under which Mr. Allen
will buy a total of 1.4 million common shares at $90 a share.
Go2Net's shares were halted morning on the Nasdaq Stock Market. The
shares closed Friday at $87, up $3.
Allen Gets 54% Stake
Go2Net said that assuming all of the shares being tendered for are
purchased and the preferred stock sale is consummated, Mr. Allen will
own approximately 54% of the outstanding shares of the company,
assuming conversion of the preferred stock.
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Cable-TV executives argue that their industry is poised to take advantage
of the convergence of communications, computing and entertainment. The
key to future growth is the next-generation digital set-top box, which is
slated to be rolled out next year on some systems. The box will allow
cable-TV companies to enter several new businesses: telephony,
high-speed Internet access, enhanced interactive TV, high-definition TV,
near video-on-demand plus additional digital channels for conventional TV
programming.
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Broadview International LLC was the financial advisor to Go2Net for the
transaction; NationsBanc Montgomery Securities represented Mr. Allen
and Vulcan Ventures.
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Which of these five functions do you most want from a
convergence device?
Surf the Internet over your TV 977 (20%)
View video-on-demand 1872 (38%)
Pause, rewind or fast-forward a program 1262 (26%)
Watch TV with a wraparound Web page 381 (8%)
Access an electronic program guide 451 (9%)
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