Microsoft Corp co-founder Paul Allen has added a web portal to his evolving plans for an integrated high-speed internet service by agreeing to take a majority stake in Go2Net Inc for roughly $750m. Go2Net said Monday that Allen will pay $300m for new convertible preferred stock in the company and intends to buy $450m worth of existing common stock at $90 per share – a slight premium over Friday’s Nasdaq closing price of $87 – which would give him 54% of the Seattle-based firm.
The deal adds to Allen’s growing stable of new media investments and will see Go2Net work with his affiliated cable companies to provide their subscribers with access to the company’s portal services. Allen’s cable holdings include Charter Communications Inc and Marcus Cable Co, which together comprise the seventh- largest cable operation in the US with 2.4 million customers. Coupled with his stake in Denver-based internet-over-cable outfit High Speed Access Corp, the addition of Go2Net backs up Allen’s belief that comprehensive portal services such as Go2Net delivered directly to set-top boxes will be a critical component of the future of cable. Strategically, the deal is similar in nature to @Home Network’s agreement to purchase Excite Inc, announced in January.
Go2Net CEO Russel Horowitz and the company’s existing management team will continue to run the company, which currently focuses on the areas of web searching, finance, e-commerce and games. The company owns the Silicon Investor and MetaCrawler web sites and recently agreed to purchase web site ranking firm Web21. It will use the investment to fund its expansion with the addition of new content and services. Go2Net shares exulted in the news Monday, jumping $26.375, or more than 30%, to close at $113.375.
The specific terms of the deal call for Allen to pay $300m worth of newly-issued convertible preferred stock, convertible into approximately 26% of Go2Net’s common stock. Roughly $165m worth of the convertible was purchased Monday, with the remaining shares to be purchased upon shareholder approval. In addition, Vulcan Ventures will commence a tender offer to purchase up to 3.6 million shares of common stock at $90 per share in cash on or before Friday. Of that total, certain members of the company’s management and board of directors have already entered into agreements under which Allen will buy 1.4 million shares and also agreed to vote all of their Go2Net stock in favor of the transaction. If all goes according to plan, Allen will own approximately 54% of the outstanding shares of the company, assuming conversion of the preferred stock.
