Lycos Investor Balks At Deal
Shares of CMG Inc. rallied Thursday afternoon after the big tech investor reportedly said it may reconsider its support for USA Networks' controversial acquisition of Lycos, fueling speculation the venture company may bend to the deal's critics.
Lycos' pact to merge with the Barry Diller-controlled media company drew fire from some major shareholders. Some railed against the pact as a "take-under" because of the questionable value of the premium Diller paid for the Web-portal service.
Andover, Mass.-based CMG (CMGI) owns about 20 percent of Lycos, the Web's third-largest search engine. When USA Networks announced the deal, Lycos (LCOS) shares shed more than one-quarter of their value, while the stock in USA Networks rose.
On Thursday, CMG stock rose 11 3/16 to 103 1/4, Lycos shares added 13 1/16 to 100 5/16 and USA Networks (USAI) gained 1/2 to 39 3/4.
CMG told CNBC that although it initially approved of the deal, it is now "re-assessing" it amid concerns about the price Lycos shareholders were getting for their stakes in the company. CMG's representative didn't immediately return calls seeking comment.
A source at a CMG-backed tech company told CBS.MarketWatch.com that he was surprised by the company's move. But he noted that the chief executives of Lycos and CMG have butted heads in the past in disputes over Lycos' incorporation of CMG properties, and because of personality clashes.
In addition, a San Francisco-based money manager pointed out other Lycos shareholders may have put pressure on CMG not to accept USA's bid for Lycos.
They might have been weighing investing in other CMG properties, but might have expressed some concern about how CMG "monetizes its assets," said Chris Lenzo at Capital Trust Management.
USA Networks is combining its Home Shopping Network and other Internet properties with search portal Lycos and Ticketmaster Online CitySearch in a complex stock swap that will result in a brand new commerce and media powerhouse.
The new entity, to be called USA/Lycos Interactive Networks, will have at its inception a combined revenue of about $1.5 billion, according to a company statement announcing the merger.
Written By Brenon Daly, CBS MarketWatch