Allen Seeks Control of Web Portal Go2Net
In an effort to tie together its wide-ranging holdings in cable and Internet companies, billionaire Paul G. Allen’s Vulcan Ventures will spend up to $750 million for as much as 54% of Internet portal site Go2Net, Vulcan said Monday.
“Comprehensive portal services such as Go2Net delivered directly to set-top boxes will be a critical component in the future of cable,” said Allen, a co-founder of Microsoft and an early investor in America Online who is estimated to be worth about $22 billion.
Vulcan Ventures will purchase $300 million in preferred shares convertible into a 26% stake in Seattle-based Go2Net. Vulcan will also buy 1.4 million shares of Go2Net from company managers and directors at $90 each and make a public tender offer, at the same price, for an additional 3.4 million shares.
The deal comes on the heels of several other portal deals aimed at wedding Internet properties to cable and other media companies. @Home Corp. is buying Excite for $6.7 billion so it will have an offering for subscribers to its high-speed access service delivered over cable. Barry Diller’s USA Networks is trying to acquire Lycos to build an electronic-commerce powerhouse.
With Go2Net’s stock rocketing $26.38 on Monday to close at $113.38 on Nasdaq, public shareholders may not be interested in Allen’s $90 offer, leaving him with less than a majority stake in the company.
“We would recommend investors not tender their shares,” said David S. Levy, an analyst with ING Baring Furman Selz, a New York-based brokerage house.
Levy says a more limited Allen investment would still be important because it would help Go2Net finance its aggressive expansion plans and give it access to Allen’s constellation of Internet-related investments.
Go2Net Chief Executive Russell Horowitz declined to comment on speculation that Microsoft had earlier expressed interest in acquiring the portal. Go2Net’s stock price soared from $53.50 on Feb. 24 to $87 on Friday based on speculation that the company would be acquired.
Viewership of Go2Net’s sites, which include such popular Internet properties as Silicon Investor and the search engine Metacrawler, has quintupled to 5.3 million in January from a year ago, making it the 22nd-most popular Web network, according to Media Metrix.
Allen sees Go2Net as the foundation for a broad set of services, including e-commerce, to offer his expanding base of cable subscribers.
“Go2Net is the critical glue that will tie together the wired world for us,” Vulcan President William Savoy said.
The company has invested more than $8.4 billion in cable companies.
While Savoy has high hopes for the potential of offering Internet-type services over cable, he acknowledges they could be years away.
“We joke about how fast things are on the Internet, but we also joke about how slow things move in cable,” he said. “But now is the time to make the move so when you reach critical mass on cable, you have something to offer.”
