CMGI buys AltaVista for $2.3 billion

CMGI and AltaVista hope to provide Internet services to both businesses and consumers and to drive the Internet PC market by combining Compaq's consumer PC business with CMGI's network of Internet destinations and technologies.

As previously reported by CNET News.com, CMGI will acquire control of Compaq's AltaVista business and its related properties--Shopping.com and Zip2--and will integrate the AltaVista search engine into its network of 40 Internet operating companies.

Under the terms of a definitive agreement, Compaq will transfer 83 percent equity ownership in the AltaVista business to CMGI. Compaq will retain 17 percent equity ownership and hold a board seat.

In return, Compaq will receive 19 million CMGI common shares and CMGI preferred shares equivalent to 1.8 million CMGI common shares, which combined would represent a 16.4 percent fully diluted equity stake in CMGI.

In addition, CMGI will issue a $220 million three-year note to Compaq, bringing total consideration for CMGI's 83 percent ownership in the AltaVista business to approximately $2.3 billion, implying a total value of $2.7 billion for AltaVista.

Compaq also will take a seat on the CMGI board of directors and plans to announce the appointment to this new position in the coming months.

The agreement, subject to regulatory approval, is binding on both parties and does not require shareholder approval for the closing, the companies said.

With today's deal, the companies are hoping to be able to aggressively pursue Internet-related business and market opportunities.

"Our partnership will define and lead the consumer and enterprise market, from PC to Web, by combining Compaq's consumer Internet PC, commercial computing and infrastructure leadership, global reach, and worldwide customer base with CMGI's network of leading Internet technologies and destinations," CMGI chief executive Dave Wetherell said in a statement.

The deal also named Compaq as a premier IT partner to CMGI, while CMGI will be the chief provider of Internet technology to the computer maker.

"CMGI has established itself as a clear leader in the Internet economy," added Compaq acting chief executive Benjamin Rosen in a statement. "And as CMGI's largest outside shareholder and its principal strategic partner, we look forward to mutually driving future Internet opportunities for the benefit of the Internet marketplace, our respective shareholders, customers, and employees."

The deal lifted CMGI shares 11.2 percent in midafternoon trading to 108.63. Compaq stock rose 3.64 percent to 23.13.