It was lucky for portal aspirant Excite Inc that it had good news to announce today, in the shape of $21m in ad sales for Netscape’s NetCenter and a done deal with SinaNet to produce a Chinese language search engine. What searchers won’t find in Excite’s bullish press release archive is any reference to the lawsuit brought by shareholders over Excite’s dismissal of a takeover bid from food company Zapata Corp (CI No 3,416) – at least, not yet. According to News.com, two class-action complaints, one from Taam Associates and the other from a Lazar Blisko, were filed against Excite in San Mateo Superior Court at the end of May. The complainants say that in rejecting Zapata’s offer out of hand, Excite executives failed to carry out their fiduciary duty to maximize shareholder value. Excite won’t comment now, but at the time it treated the offer as if it were laughable. A May 21 statement entitled Excite Declines To Acquire Food Processing Company read in part: The letter was worded as an offer by Zapata (valued at approximately $250m) to acquire Excite (valued at approximately $1.3bn)… Given the vast disparity in the market capitalization of Excite and Zapata, and the complete lack of synergy between the two companies’ businesses, Excite believes that the proposal is not feasible, would be vastly dilutive and holds no possible value to Excite’s shareholders. That conclusion looks less persuasive than it did two weeks ago, before Excite shares slid as low as $54 from a 52-week high around $93. On the day the offer was made, Zapata’s $72 per share represented a 20% premium over Excite’s closing price. Shareholders could be forgiven for wanting their money, and perhaps even for wanting Excite executive heads. Though the disparity in market capitalization remains striking, the contrast between Zapata’s cash reserves and Excite’s debts is no less remarkable. Even Excite’s $21m worth of NetCenter revenue should be set against the $70m or so it paid for access to NetCenter in the first place (CI No 3,414). After all, is it really so foolish for a fish oil manufacturer to want a stake on the internet? As the San Jose Mercury’s Adam Lashinsky observes, Zapata has everything it takes to be a new media player: To wit, it’s a master of hyping its products, whatever they are. It changes its strategy frequently. And its executives know how to dump their stock at the top. The day may yet come when Excite’s top brass wish that they had bailed out in good time.
