Ending a couple of years of speculation, H&R Block Inc has finally sold its CompuServe Corp online content provider to WorldCom Inc, which in turn has kept the bits it wants and done a deal with America Online Inc for the rest. WorldCom initially bought the whole of CompuServe in a stock transaction valuing the internet and online service provider at around $1.2bn. In a complicated three-way deal, WorldCom then bought America Online Inc’s network business, ANS Communications, in exchange for $175m cash and the CompuServe Interactive Services Division in a deal worth $425m. That means that for $250m, AOL has purchased CompuServe’s 2.6 million direct subscribers. AOL says it will operate CompuServe as a separate service from AOL in all its markets for the time being. In return, America Online has signed sign a five year contract with ANS, so that WorldCom becomes its largest network service provider. WorldCom retains CompuServe Network Services, which has one of the largest data communications networks in the world, with some 100,000 dial-up ports and more than 1,200 high-end corporate customers. The deal effectively means that AOL becomes a huge content provider with some 11.6 million subscribers , and WorldCom adds more internet service infrastructure and the ability to service what it calls ‘unprecedented demand’ for high bandwidth. AOL chairman and chief executive Steve Case said he didn’t envisage any anti-trust issues getting in the way of completion of the deal. CompuServe shareholders, including 80% holder H&R Block, will get 0.40625 shares WorldCom stock on a fixed exchange ratio, which protects CompuServe shareholders if World Com stock falls too low while gaining the benefit of any rise in WorldCom stock during the closing period, which could take up to six month, though executives from WorldCom and AOL hoped it would be complete by the year-end. At the end, H&R block will hold approximately three percent of WorldCom. The $1.2bn price tag, based on Friday’s closing prices, values CompuServe at about $12.80 per share, which means CompuServe was sold cheap, as it closed at $13.50 that day. AOL chief executive Steve Case said handing over ANS to a telecoms company with WorldCom’s infrastructure and expertise, would best serve the future needs of AOL in Europe, where AOL is expanding its partnership with Bertelsmann AG, which will pay $75m to AOL, and the two companies will each invest $25m in a joint venture to operate CompuServe. They say the two services are complementary, as CompuServe targets the small business user, while AOL concentrates on the home consumer and entertainment market. The deal adds around 850,000 CompuServe members to AOL Europe’s 700,000, making some 1.5 million in total. WorldCom says the deal should be revenue positive in 1998, and provide important economies of scale, as well as significant revenue growth. Many observers expressed concern of AOL introducing its mass marketing techniques and widespread advertising into CompuServe would frightened off its subscriber base, which has traditionally been the technical and business user. Case said that as CompuServe users have chosen to service in the past for a reason, and AOL wants to continue to make sure they have that reason. He said AOL would incur a gain after the transaction, which will be specified nearer the closing date and will be spread over five years. Neither WorldCom nor AOL envisage any job losses at this time, claiming that part of what both are buying is the original CompuServe expertise. AOL closed up $6.125 at $76.0625; WorldCom up $2.25 at $33.75; CompuServe down $0.1875 at $13.3125.