NBC, Xoom, Snap In Net Merger
Xoom.com Inc. is merging in a three-way transaction with General Electric's (GE) NBC unit and CNet's (CNET) Snap.com to form a new company called NBC Internet.
The new company said it will be the seventh largest Internet site in terms of audience reach and is valued at $3.8 billion based on Xoom's closing price of $75 a share on Friday.
NBC Internet will also be publicly traded under the ticker symbol "NBCI." According to NBC's press release, the new publicly traded Net/Broadcast company will be the first Internet company integrated with a major network broadcaster.
MarketWatch.com (MKTW), the publisher of CBS.MarketWatch.com, went public in January. CBS (CBS) owns 38 percent of the financial news site.
"They plan to use the broadcast channel to drive traffic to the Web - taking viewers and convert them into Web users, then Web members, then Web buyers," said Catherine Skelly, Internet analyst at BlueStone Capital.
"So, they'll integrate the marketing efforts of the broadcast channel with the Web properties to a much greater extent than has ever been done before," Skelly added.
Under the terms of the deal, the new company will be NBC's exclusive Internet commitment, encompassing portal, community and e-commerce according to NBC's press release. Snap will be the umbrella consumer brand, integrating TV, portal and e-commerce.
Bob Wright, president and CEO of NBC, will become chairman for the NBCi board. Xoom Chairman Chris Kitze will become president and chief executive.
As a result of the deal, Xoom shareholders and option holders will own a 34 percent stake in the new entity. NBC will own 49.9 percent and will name directors to six of the 13 board seats. NBC will also buy a convertible debt instrument which could result in a 53 percent ownership stake if exercised. CNet and Snap.com option holders would own a 13 percent stake.
Shares of Xoom rose 6 7/8, or 9 percent, to 82 15/16 on the news. Shares of CNet rose 10 1/4 to 124 but GE shares were down 5/16 to 109 5/8.
Tom Rogers, president of NBC Cable, said the way to invest in this new entity is to invest in Xoom. Executives of the companies estimate NBC Internet could generate $60 to $70 million in revenue this year. Executives noted that ValueVision International (VVTV), which operates a television home shopping network, could provide additional synergies to the deal. GE recently took a 19.9% stake in the company.
Word of Monday's announcement was first reported on CBS.MarketWatch.com early Monday morning. Xoom.com, before its April secondary offering, said it held preliminary talks with a major investor, according to documents filed in its secondary offering prospectus.
Written By Bambi Francisco