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Terra Networks to Acquire Lycos

Internet: The Spanish- language service provider will get a U.S. presence.

May 17, 2000|PETER SVENSSON | ASSOCIATED PRESS

NEW YORK — Spanish Internet company Terra Networks said Tuesday that it will buy U.S. Internet portal Lycos Inc. for $12.5 billion in stock.

The widely expected deal, announced after the close of financial markets, gives the dominant Internet service provider in Latin America a foothold in the United States, where about 35 million Spanish speakers have an average income well above that of their counterparts south of the border.

Under terms of the deal, Lycos shareholders will receive $97.55 a share in Terra stock as long as Terra's stock price does not rise or fall more than 20% from the recent closing price.

Lycos shares had climbed 18%, or $11, before the announcement to close at $72.63 on Nasdaq. Terra shares closed down6%, or $3.31, at $53.56, also on Nasdaq.

Set up in 1998, Terra has wooed millions of Spanish- and Portuguese-speaking Web users in Europe and Latin America.

Lycos, based in Waltham, Mass., operates the fourth-largest Internet portal in the United States.

The company will be called Terra Lycos Inc. Juan Villalonga, the high-profile chairman of Terra Networks and Spain's Telefonica, will be the chairman of the new company. Lycos Chief Executive Robert Davis will be CEO.

Terra also said it has entered a five-year agreement to buy advertising and content worth$1 billion from German media giant Bertelsmann.

Analysts say Terra would benefit from Lycos' strong presence in online communities and chat rooms, as well as its specialized content. The Lycos network of Web sites is visited by 33 million people per month, including Web users in Europe and Asia.

Terra is already Europe's largest publicly traded Internet company, with a market value of nearly $17 billion, nearly three times that of Lycos.

On Friday, Terra posted first-quarter losses of $63.8 million--nearly triple the losses it posted during the same period in 1999. The company does not expect to turn a profit until 2003.

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