Yahoo! To Buy GeoCities
Yahoo! Inc. is buying GeoCities Inc. for $4.58 billion in stock, creating the world's largest Internet search and directory service.
The deal announced Thursday would give Yahoo! another powerful brand name while helping Geocities reach more Web users. The addition of GeoCities' Internet traffic makes Yahoo the No. 1 gateway to the World Wide Web, according to figures from Media Metrix Inc., a research firm.
The deal between Yahoo (YHOO) and Santa Monica-based Geocities (GCTY) comes on the heels of last week's $6.7 billion deal by At Home (ATHM) to buy search portal Excite (XCIT) as Web companies succumb to the urge to merge.
GeoCities (GCTY) bolted 42 1/4, or 56 percent, to close at 117 1/4. Stock of Yahoo! tacked on 31 7/8, or 10 percent, to 367 3/4.
News of the deal fueled rises in stocks of other providers of Web community sites. TheGlobe.com bolted 20 7/16, or 52 percent, to 59 15/16; and Xoom.com hurdled 21 1/2, or 54 percent, to 61 1/16.
Yahoo will record a second quarter charge for the deal, but did not disclose how much it would be.
Yahoo said GeoCities is the "the definitive leader in personal publishing tools and Web-based communities."
"This powerful combination enhances Yahoo!'s position as one of the world's leading global branded Web networks," Yahoo said in a statement.
Yahoo will issue 0.3384 shares of its common stock for each share of GeoCities.
Upon completion of the merger, Yahoo will exchange about 10.6 million common shares for about 31.4 million common shares of GeoCities.
Yahoo will convert about 8.9 million GeoCities stock options into about 3 million Yahoo stock options through a pooling of interests.
Yahoo expects to complete the deal in the second quarter.
GeoCities hosts about 3.5 million Web sites by members, one of the Web's largest communities.
"Through this acquisition, we are accelerating our global leadership position by combining two of the Web's strongest brands and most heavily used services into one powerful offering," said Tim Koogle, chief executive of Yahoo.
Yahoo, which made an investment in GeoCities last year, already has a cross-promotional alliance with the company.
Softbank Corp. of Japan owns stakes in both firms.
"If they buy GeoCities, it's the first time that Yahoo will acquire a property that they plan to profile on the site besides themselves," Andrea Williams, an analyst with Volpe Brown Whelan in San Francisco, told The Wall Street Journal before the deal was announced. "So far, Yahoo has focused on building its brand, so this will be interesting."