CMGI to Let Lycos Merger
Go to a Shareholder Vote
By JON G. AUERBACH
Staff Reporter of THE WALL STREET JOURNAL
The leading opponent to the proposed merger of Lycos Inc. and
USA Networks Inc. says it intends to let the plan go to a
shareholder vote instead of immediately proposing an alternative
transaction.
Officials of CMGI Inc., the Internet-company holding firm that has
been trying to block the merger, are confident they will get the
votes needed to defeat the plan. "Time is on our side," says
Peter Mills, who heads CMGI's venture-capital unit.
CMGI and affiliates hold about 20% of
Lycos's shares, and several institutional
investors have expressed doubts about
the deal. The vote is expected in July.
Until recently, investors had been hoping for another suitor for
Lycos, an Internet portal company, based on statements by CMGI
Chief Executive David Wetherell that he was looking for
alternatives to the USA Networks transaction and had spoken to
interested parties.
But recent USA Networks filings with the Securities and
Exchange Commission indicate that the strategy of trying to
quickly line up another suitor might result in a potentially lucrative
windfall for USA Networks. The company has proposed
combining certain of its assets with Lycos in a transaction that
would give USA Networks control of the surviving entity.
Under the terms of the business combination, the filings show,
USA Networks has the right to receive options to purchase up to
17.5% of Lycos shares if Lycos shareholders vote down the deal
after the company receives a bid from another suitor. The options
are also triggered if Lycos holds takeover discussions with
anyone else.
If Lycos shareholders vote against the deal without a competing
bid on the table, the options agreement is terminated, according
to the merger document. USA Networks officials declined to
comment on the merger agreement.
Big Lycos shareholders including Robertson Stephens Funds, a
division of BankAmerica Corp., have said they don't expect to
vote for the deal. Other large investors, including Van Kampen
Funds, have said they aren't sure whether they will support the
transaction.
Since the deal was announced, Lycos shares have tumbled on
investors' concerns that the business combination doesn't
adequately value the Web portal. Wednesday in Nasdaq Stock
Market trading, Lycos fell $3.75 to close at $101.75 a share. That
is about $27 below the price when the deal was announc |
