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Diller logs off of Lycos purchase; stox surge

$18 bil deal falls through due to shareholders' opposition

Barry Diller’s USA Networks and Ticketmaster Online-CitySearch on Wednesday officially scrapped plans to acquire Internet portal Lycos for $18 billion but say the companies plan to remain business partners.

The deal’s expected end (Daily Variety, May 11), blamed in part to stiff opposition from Lycos shareholders, calls for Lycos to pay $35 million to USA Networks’ Interactive unit and Ticketmaster if Lycos agrees to another acquisition deal before July 15. Industry sources said USA Networks didn’t believe it could win the support of Lycos shareholders during a vote on that date.

Lycos’ biggest shareholder, CMGI Inc., opposed the deal on grounds that it shortchanged investors. “We are gratified that Lycos shareholders will now have new avenues to realize appropriate value for their shares,” said CMGI chief David Wetherell.

Lycos CEO Robert Davis said the companies “misjudged the market reaction to the deal.”

As part of the termination, USA Networks and Ticketmaster also have agreed not to acquire more Lycos stock or make any new proposals to acquire Lycos before July 15.

Diller’s expected withdrawal has boosted Lycos’ stock, since plunging 26% after initial news Feb. 9 of the planned three-way merger.

The stock surged 18% on Monday and 14% more Wednesday, gaining $13.25 to close at $111.50 in late trading, still not reaching its $127 price before news of the acquisition.

USA Networks was up $2.81 at $38.69, while Ticketmaster also was up $3.875 at $36.50, a gain of 12%.