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To: Bradley W. Price who wrote (1105)	2/9/1999 8:25:00 AM
From: steve poon	Read Replies (2) \| Respond to of 2004

more good news February 9, 1999 Lycos Is Expected to Announce Deal With USA's Home Shopping Network By EBEN SHAPIRO and JON G. AUERBACH Staff Reporters of THE WALL STREET JOURNAL USA Networks Inc. is expected to announce Tuesday that it will merge its popular cable-television Home Shopping Network unit with Internet portal Lycos Inc., creating a vast new e-commerce powerhouse with ties to a fast-growing entertainment empire. Issue Briefing: Portal-Site Mania While the precise terms of the transaction couldn't be determined, the combined market capitalizations of the companies involved is about $20 billion. Lycos's stock has risen sharply in recent weeks as speculation mounted that it would be the next Web takeover target. Lycos's market valuation exceeds $6 billion, although its revenue in the past four quarters totaled just $72 million. Lycos shareholders will get only a slight premium, about 2%, over Monday's closing price of $127.25, down $9.75, or 7.1%, on the Nasdaq Stock Market, according to people familiar with the deal. Lycos shareholders will get about 2.25 shares in the new company for each share of Lycos they own. In addition, Lycos shareholders will get preferred stock, which under certain conditions could convert in three years to an additional 5% of common stock in the new company. Other Assets in Deal USA Networks Chairman Barry Diller will be chairman of the new company and USA Networks will control 61.5% of the new company, according to people close to the transaction. USA also is contributing other Internet assets as well as TicketMaster Online-CitySearch Inc., a separate publicly traded company that USA controls. USA operates the cable channel USA Network and the Sci-Fi Channel. Lycos shareholders will control 30% of the new company, with 8.5% going to TicketMaster Online holders. As part of the deal, Ticketmaster Online will merge with Lycos. The new company will be called, USA/Lycos Interactive Networks Inc. Robert Davis, president and chief executive of Lycos, will become president and CEO of the new company. The deal would require the approval of Lycos shareholders. On a pro forma basis, the new company will have $1.5 billion in sales and it will reach 30 million Web users, nearly half of all Web surfers. The complex stock deal, which involves three separate publicly traded companies, is the latest in a blizzard of hastily arranged marriages between traditional media companies and Internet start-ups. The Internet companies are looking to take advantage of the huge audiences of television companies such as USA Networks. The Home Shopping Network, for example, reaches 70 million homes. And USA gains a tie to Lycos, the second most popular Internet portal, trailing only Yahoo! Inc. Electronic-Commerce Giant According to the people familiar with the deal, USA Networks and Lycos envision an e-commerce giant that will direct consumers from the Web to the Home Shopping Network and back. Lycos also is expected to be promoted extensively on USA's two cable networks, USA Network and the Sci-Fi Channel, although those networks aren't part of the deal. Mr. Diller, the veteran entertainment executive who ran two movie studios and helped to create News Corp.'s Fox Broadcasting Co., has been increasingly focused on the Internet in the past year. In December, Mr. Diller shepherded the highly successful public offering of TicketMaster Online. USA Networks controls about 60% of TicketMaster Online, an Internet company that allows music fans to buy concert tickets online. In addition to contributing Home Shopping Network, USA Networks also will contribute its traditional Ticketmaster business, which sells tickets over the telephone and at physical locations, and an Internet shopping service called ISN/First Auction. Frenetic Search People close to the transaction say the assets contributed by USA Networks are valued at nearly $10 billion, a premium to predeal valuations. Lycos has a current market capitalization of $6.3 billion and Ticketmaster Online is valued at about $4 billion. The deal caps a frenetic search for a partner for Mr. Davis, the 42-year-old executive who has managed to turn Lycos from an also-ran in the Internet directory market into one of the leading Web sites. Lycos also held talks with Time Warner Inc. and Bertelsmann AG. A year ago, Lycos was the No. 4 search engine, attracting fewer than 15% of all Web visitors. Its home page was confusing and slow to load on computer screens. After a revamping, Lycos attracted 46.5% of all Internet users to its various sites in December, according to Media Metrix Inc. Lycos grew quickly partly by buying companies while most of its rivals were busy linking up with bigger media players. The company, based outside Boston in Waltham, Mass., spent more than $250 million last year on acquisitions by tracking where Lycos users went after leaving the site and buying companies that competed in those spaces. For instance, the company purchased home-page building service Tripod Inc. last year after discovering that many Lycos users also were visiting home-page sites.