A sale of
the unit, which is based in Waltham, Mass.,
would unwind the $12.5
billion merger of Lycos and Terra Networks,
struck in 2000 at the height of the dot-com
bubble. Now, with a resurgence of online
advertising spending, Terra is seeking a buyer
for the Lycos division as it focuses on its
Spanish- and Portuguese-language businesses,
according to the document, prepared by Lehman
Brothers and circulated to prospective buyers
over the past several weeks.
acquisition of Lycos, one of the last available
premier Internet search and content properties,
represents an outstanding and unique value
creation opportunity at a time when advertising
budgets are increasing, paid online content is
gaining broader acceptance and public markets
are favorably rewarding consolidation in the
rapidly growing search market," the
Lycos is hoping to sell Lycos for cash or liquid
shares. Although no purchase price was listed,
one source familiar with the deal said Terra
Lycos is looking to sell Lycos for $200 million,
based on $98 million in pro-forma revenue that
the site generated in 2003.
Lycos representative declined to comment. A
spokeswoman for Lehman Brothers did not
immediately return calls seeking comment.
The effort to sell Lycos offers the latest
evidence of the reviving fortunes of Internet
companies, thanks to improved financial earnings
and growing confidence in online advertising.
Hype for the sector is set to soar this week,
when Web search engine giant Google is expected
to announce plans for an initial public
offering, an event that could inspire a new
round of dot-com deal-making.
expect a return to the heady days of the late
1990s, when Internet companies with no profits
were sold for stock worth billions of dollars on
paper. But excitement is building once again for
Internet companies--particularly those with an
angle on Web search.
success of the paid-search business has
sent the stocks of Internet search
led the way in deal-making to date, acquiring
companies in the United States and abroad with
stock and cash from a $2.79
billion war chest. In the past year,
Yahoo has acquired
paid-search company Overture Services for about
$1.6 billion, French comparison shopping
for $579 million in cash and Chinese
search company 3721 Network Software for $120
success of the paid-search business has sent the
stocks of Internet search companies surging,
including those of little-known players such as
Mamma.com, whose shares jumped from about $2 in
early March to more than $10. The company is
backed by dot-com bubble investor extraordinaire
Mark Cuban, who sold his Broadcast.com start-up
to Yahoo in 1999 for stock worth more than $5
billion, and cashed out near the top.
Things are beginning to look up for Web
businesses, however, thanks to renewed
confidence in online advertising, bolstered by
Web search. Lycos uses Google to post commercial
links throughout its Web search results and gets
a cut of revenue every time one of its users
clicks on the link, something the Lehman Bros.
bankers are counting on to lure in potential
and Yahoo subsidiary Overture have helped
contribute significant amounts of cash to
companies that use their search links. AOL, for
instance, received $200
million in 2003 from revenue generated
through its Google relationship, up from $35
million in 2002.
also have some other assets that would interest
potential buyers, such as its collection of
various Web sites for certain categories. The
company operates businesses such as
Matchmaker.com for online personals, Quote.com
for finance, Angelfire and Tripod for Web
publishing, and Wired News. These businesses
could be attractive for some potential suitors.
it worth buying a second-tier portal? To the
right buyer it may make a lot of sense,"
said Charlene Li, an analyst at Forrester
Research. "You can make a good living
(even) if you're not the top player."
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