Disney To Buy Rest Of Infoseek
By Nicole Volpe
NEW YORK (Reuters) - Walt Disney Co. said Monday it agreed to acquire the 57 percent of portal Infoseek Corp. (Nasdaq:SEEK - news) that it doesn't own, and will create a new Internet company called Go.com.
Infoseek shareholders will get stock in the new company, with each Infoseek share exchanged for 1.15 shares of Go.com. Other details of the deal, including the possible range of Go.com shares, were not disclosed.
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 of our video assets and creative abilities.''
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, and said the new enterprise fundamentally would be a combination of the two companies and their 2,000 employees.
Regarding the costs of the deal, Disney Chairman Michael Eisner said, ''Despite some EPS (earnings per share) worries, goodwill and the rest, we are investing in this for the future. If you believe that people are watching movies in the future, not only on DVD (digital video disk) and VHS (video cassette recorder format), but on the Internet, we have to be there,'' he said.
''We think it is a good idea to have profits, but we understand you have to invest to get to that point. We want to position ourselves for the broadband world, and in the broadband world, content will reign,'' he said.
Infoseek and Disney jointly launched Go earlier this year as a new Internet portal to compete with Yahoo! Inc., America Online Inc. (NYSE:AOL - news) and Lycos Inc. (Nasdaq:LCOS - news) . But several critics say they were slow to execute a clear strategy and hindered by answering to two different management teams.
In Monday trading on the New York Stock Exchange, Disney shares added 37.5 cents to $27.81, while on Nasdaq, Infoseek shed $5.56 to $45.94.
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.
Newly created Go.com, which would trade 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.
Disney's top Internet executive said Go.com could double its revenues in the year 2000.
''Clearly we see huge growth potential. We see the capacity to double those revenues for fiscal '00,'' said Steve Wadsworth, the president of Disney's Buena Vista Internet Group, which would be combined with Infoseek.
Infoseek Chief Executive and President Harry Motro would continue in those jobs until the deal closed and through a transition period, then take some time off. Staggs would 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, 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 research firm Media Metrix.
Staggs said the company would seek to beef up the electronic commerce side of the business by folding in the catalog business to help support online sales. ''The logic behind integrating the catalog is that it is very leverageable 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.''
After the deal, Disney would own 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.
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. (Nasdaq:CNET - news), with Xoom.com Inc., which will be renamed NBC Interactive.
|
