US networks merge with Lycos

USA/Lycos will have at its inception, on an historical pro formal basis, combined revenue of more than 1.5 billion, significant operating cash flow, and a profit beforegoodwill amortization. On the first hour of the first day, USA/Lycos will have the immediate capacity to reach 70 million television homes, take more than 1 million transactional phone calls and ship more than 200,000 units each day.

On the Internet, USA/Lycos will reach approximately 30 million people, nearly 50 per cent of all users, through its network of Web sites. The company will operate four of the top 20 Web sites with Lycos, Tripod, Hotbot and Angelfire and a network of 19 online city guides.

USA/Lycos will immediately handle more than 1 million online transactions per quarter, including online real-time auctions. It will be a global company with interests or holdings in Canada, Mexico, South America, Asia, Europe and Australia. USA/Lycos will combine Lycos, the second most visited Web portal and largest online community, with TMCS, the leading provider of local content, advertising and commerce on the Internet.

The new company will include the substantial electronic commerce infrastructure ofHSN, the pioneer in electronic retailing through television, and Ticketmaster, the premier ticketing company in the nation.

Ted Philip, Chief Financial Officer of Lycos, will become Chief Financial Officer of the new entity and will join its Board of Directors. Charles Conn will remain Chief Executive Officer of TMCS and is expected to take on additional senior management responsibilities within the new Company. Upon the closing of the transaction, USAi will own 61.5 per cent, Lycos shareholders will own 30 per cent and TMCS shareholders other than USAi will own 8.5 per cent of the USA/Lycos equity TMCS shareholders, including USAi, will receive in the aggregate approximately 19 per cent of the USA/Lycos equity.

Additionally, Lycos shareholders can increase their ownership another 5 per cent, to a total of 35 per cent, and TMCS public shareholders can increase their ownership by 0.15 per cent, to a total of 8.65 per cent, should the initial USA/Lycos shares achieve an average market value of 45 billionover specified periods. USA/Lycos will have a significant relationship with USAi, which will bring promotional opportunities across USAi8217;s broadcasting and cable assets, which reach 90 per cent of the US.

TV-viewing households and include The USA Network, The Sci-Fi Channel, Studios USA, and USA Broadcasting. The Company will also benefit from the strength of the Lycos Network to circulate traffic by introducing the fastest growing audience on the Web to all its properties.

In addition, USA/Lycos advertisers and commerce allies will benefit from access to TV, online and Ticketmaster outlets, creating unprecedented advertising, commerce and promotional opportunities. Barry Diller said: 8220;This places all the necessary ingredients for electronic information and commerce, from old8217; soup to new8217; nuts, into one centrally and aggressively managed enterprise. There is no excuse now for us not to be a dominant player as the world continues its transition towards interactive systems. I have great confidence inthe ability of Bob Davis, together with the superb leadership of Mark Bozek at Home Shopping Network, Charles Conn at Ticketmaster-Online CitySearch, Inc., Terry Barnes and Gene Cobuzzi at Ticketmaster and Alan Citron at USA Networks Interactive, to be able to execute the ambitious agenda we8217;ve set before ourselves.8221;

8220;With this move, the company Lycos built through aggressive acquisition, quality brands and talented employees instantly becomes a major media company and a global commerce force,8221; said Robert Davis. 8220;Lycos has not only survived the portal wars, but with USA/Lycos we have vaulted past our competition and dwarfed them in revenue, earnings and cash flow. Our combination of commerce, global and localized content and community delivers unprecedented value to consumers, advertisers and commerce partners in a way no other entity can. Further, with the legendary vision of Barry Diller on our side, we can set the standards for a 21st century media company.8221;

Charles Conn said: 8220;We believe thenew company has the potential to be the first Internet network that integrates local content and transactions both as a destination and across vertical interests. The new USA/Lycos Interactive Networks will accelerate our efforts to build the definitive network of city guides and local commerce.8221;

The transaction is subject to receipt of regulatory approvals, including Lycos shareholder approval. Lycos8217; largest shareholder, CMG Information Services, which owns approximately 20 per cent of the outstanding shares of Lycos, has advised that it is fully supportive of the transaction. The transaction is expected to be completed in the second quarter of 1999.

In connection with the transaction, Lycos granted to each of USAi and TMCS shareholders customary breakup provisions. Allen amp; Company and Lazard Freres acted as financial advisers to USAi. Chase Securities also provided financial advisory services to USAi in connection with this transaction. Wasserstein Perella acted as financial advisers to Lycos andGoldman Sachs provided financial advisory services to TMCS.