Zapata Bids for Excite, Is Rejected
Zapata Corp., a onetime oil driller trying to break into the world of cyberspace, said Thursday it was seeking to buy Excite Inc., a leading Internet company that’s five times its size.
The offer, worth $1.5 billion in newly issued Zapata stock, was immediately rejected by Redwood City-based Excite and dismissed on Wall Street as unlikely if not impossible.
Zapata, which is involved in producing sausage casings, straws and fish oil, has a market capitalization of about $258 million, barely one-fifth of Excite’s $1.3 billion.
“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,” Excite said in a news release.
“It’s just ridiculous. It does not have any legitimate likelihood of being accepted,” said Andrea Williams, an analyst at Volpe Brown Whelan & Co.
The move comes as Zapata, which was founded by former President George Bush as an oil drilling firm in the 1950s, tries to transform itself into an Internet company. The Houston-based firm recently bought two small online magazines and said it plans to change its name to Zap.
Zapata said it was offering $72 a share for Excite but would pursue a transaction only on a friendly basis.
“This transaction represents an excellent fit with Zapata’s new strategic direction because of Excite’s leading edge Internet technology, media properties and its high quality management,” Zapata President Avram Glazer said in a statement.
A spokeswoman for Excite said the company received a faxed offer letter from Zapata on Wednesday afternoon but has not held any discussions with the firm.
Zapata had no comment on the rejection, and Glazer could not be reached for comment.
Excite’s stock gained 81 cents to close at $61 on Nasdaq. Excite’s stock price has traded between $9 and $93 in the last year.
Founded in 1994, Excite rose to prominence as one of a handful of producers of successful Web search engines. Like other Internet companies, Excite is trying to broaden its role in cyberspace by offering e-mail and a wide array of online services.
Zapata also holds a 40% stake in Envirodyne Industries Inc., which makes meat casings, plastic utensils and packaging products, and 60% of Omega Protein Corp., a company that makes meal and oil from marine sources.
Zapata fell 88 cents to close at $10.25 on the New York Stock Exchange.