As expected, The Walt Disney Co. has consolidated its stake
in Infoseek Corp., the Internet portal that it already owned 43 percent of.
Disney will combine all of the assets currently huddled
under the banner of its Buena Vista Internet Group with Infoseek to create a new entity
called go.com, which will be a new class of common stock traded on the New York Stock
Exchange with the ticker symbol "GO." The reconstituted unit is expected to ring
up revenues to the tune of $350 million.
In the deal, Infoseek shareholders will turn in their
shares for 1.15 shares of go.com. When all is said and done, Disney will hold an
approximate 72 percent interest in go.com following the merger.
The deal, approved by Disney and the non-Disney members of
Infoseek's board of directors, will now be voted on by Disney and Infoseek shareholders.
It is expected to close by the end of the year.
Disney chairman Michael Eisner broke the news alongside
Infoseek CEO Harry Motro, who will bow out of the picture after the deal closes. Motro,
the former Cable News Network online executive, was instrumental in setting up GO Network.
Attempting to rebound from disappointing financial results
of late, Disney is pinning its hopes on this unit as a pure Internet play, positioned for
future growth with currency to do other Internet deals.
In an attempt to take advantage of the sky-high market
capitalizations of Internet companies, many traditional media companies have spun off pure
Internet plays into separate public outfits.
Earlier this year, NBC announced that it was bundling its
online properties with those of electronic direct-marketing firm XOOM.com and Snap -- the
portal that NBC partly owns along with CNET -- into a $4 billion public unit called NBC
Internet, or NBCi.
BVIG, run by president Steve Wadsworth, includes
Disney.com, ABCNEWS.com and ESPN.com. Wadsworth recently stepped into the shoes vacated by
Jake Winebaum, who left to start a new "Internet incubator," in which Disney
plans to take a stake.
Wadsworth reports to both Eisner and executive vice
president and chief financial officer Thomas O. Staggs, who will lead the transition team.
Upon news of the deal, Disney closed at $27.81 per share
last Monday (July 12), up 19 cents, while Infoseek took an 11 percent tumble, dropping by
$5.56 per share to $45.94.
"Instead of the Infoseek shareholders receiving an
instant premium, what happened essentially was that control was passed to another entity,
Disney, as assets were going in," said Mark Riely, president of Media Group Research
in New York.
"This is probably for the best long-term interest of
shareholders, but it disappoints those who were yearning for a quick payout," Riely
added.
