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USA Drops Lycos Plan Amid New Deal

May 13, 1999|From Times Staff and Wire Reports

USA Networks officially called off plans to buy Lycos on Wednesday, but USA Chairman and Chief Executive Barry Diller still signed a deal to partner Ticketmaster Online-CitySearch with the Internet portal site.

Pasadena-based Ticketmaster Online-CitySearch will provide city guides and other local content for Lycos, which Media Metrix ranks as the third-most-popular site on the World Wide Web. Lycos will also direct ticket buyers to Ticketmaster Online-CitySearch, and the two companies will explore options to develop an electronic commerce platform for more than 15,000 businesses served by CitySearch and its partners.

"These new agreements will allow us to secure many of the objectives we sought in the original deal," said Charles Conn, chief executive of Ticketmaster Online-CitySearch, which is controlled by New York-based USA Networks.

But the partnership announced Wednesday falls far short of Diller's original vision to create a home-shopping and e-commerce company worth $22 billion by combining Lycos with his Home Shopping Network and Ticketmaster Online-CitySearch. Diller's plan would have given 61.5% of the merged company to USA shareholders, leaving Lycos shareholders with 30% of the combined firm.

Lycos shareholders led by David Wetherell, head of the Andover, Mass.-based Internet venture group CMGI Inc., opposed the deal because it didn't offer any premium. In fact, the transaction amounted to a USA takeover of Lycos at a discount of about a third.

"It's hard to get excited about a deal that values your stock at less money than before you started," said Michael Goldston, a portfolio manager at Cambridge Equity Advisors, which owns shares in Waltham, Mass.-based Lycos and also opposed the purchase.

Under terms of the breakup agreement, Lycos will pay USA Networks and Ticketmaster Online-CitySearch $35 million if it begins acquisition talks with other companies before July 15. USA Networks and Ticketmaster have agreed that they won't acquire Lycos stock or make another proposal to buy Lycos before that date. USA Networks also dropped an option to buy as much as 17.5% of Lycos that became effective if the acquisition was terminated.

Investors applauded the breakup agreement. In Nasdaq trading Wednesday, Lycos shares gained $8.75 to close at $107. Shares of USA Networks rose $3.56 to $39.44 as Ticketmaster Online-CitySearch shares jumped $3.44 to $36.06.

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