By Nick Patience
The much-predicted portal consolidation has continued with the acquisition of Excite Inc by internet-over cable provider @Home Networks Inc for $6.7bn in stock, giving Excite’s shareholders about 30% of the enlarged company. Another winner from the deal is AT&T Corp, which will gain control of @Home-Excite when its acquisition of Tele-Communications Inc closes, which is expected to be by the end of this quarter, as TCI is the largest shareholder in @Home. Rumor has it that both Yahoo! Inc and Microsoft Corp were sniffing around Excite before it chose to go with @Home. The $6.7bn in stock values Excite at about $106.27 per share, and represents about a 57% premium on Excite’s closing price on Friday, the last day of trading before the announcement yesterday morning. The deal is expected to be immediately accretive for @Home and will add between 15 and 20% above analyst’ expectations for the company’s bottom line by 2002. @Home CEO Tom Jermoluk predicted a combined company with revenues on or above $2bn by 2002 and operating profits of 30 to 35 percent. The two company’s combined revenues over the past four reported quarters amounts to just $151.2m. This combination will enable @Home-Excite to deliver a sticky set of services to both narrowband PC and broadband cable users, as Excite CEO George Bell put it yesterday. It will become an allband provider in the new jargon. He will be staying at the enlarged company to run the Excite division of @Home, reporting to Jermoluk. The two were very excited about the synergies between the two companies, both electronic and physical, right down to being located next door to each other across a courtyard in Redwood City, California and having the same architect design their respective buildings. There are expected to be no job losses as there is almost no overlap, barring some back office operations; in fact the expanded corporation is looking to hire staff as soon as the deal closes. Along with the obvious portal qualities that Excite brings to the table, it also owns MatchLogic, the web ad measurement tool firm it bought exactly a year ago. Both Bell and Jermoluk mentioned it repeatedly as one of the key differentiators between @Home-Excite and other broadband providers, but as Excite only paid $89m for that, $6.7bn seems like an awful lot to pay for mere web measurement tools. However, @Home did buy Narrative Communications for its Enliven rich media banner advert creation tools just last month, and it also has its own media management tools specific to its cable network. Jermoluk also points to the average $150 per subscriber acquisition costs faced by most cable providers, suggesting that Excite’s personalization technology is a cheaper way of acquiring a few million extra subscribers along the way. @Home currently has just 330,000 subscribers in markets spread across the US. All the content on @Home-Excite will be available to everybody on the web, but will be delivered faster to @home’s subscribers. As Bell put it, I haven’t seen a successful business model on the web that works by restricting access to content. To pay for the deal, @Home, which also counts among its shareholders, Comcast, Cox and Cablevision, will offer 1.041902 for each Excite share. Both the board, @Home’s shareholders and around one quarter of Excite shareholders have given their approval and he deal is expected to close within three months. the acquisition will be accounted as a purchase and there will be a one time charge of about 20% of the cost for purchased research and developed, with the rest amortized over four to five years. Excite closed up $42.50, or 63.0% at $110.00, @Home’s shares closed up $13.375, or 13.1% at $115.375. Meanwhile, with Infoseek firmly within the Disney fold, AOL and Netscape getting married, Yahoo! being just too big for all but the largest communications companies, the deal puts the spotlight on Lycos Inc as the last major portal site looking for a major partner or buyer. Lycos closed up $25.0625, or 28.5% at $112.3125, and will now likely trade solely on the basis of takeover speculation.
