Lycos climbs on rumors of sweetened buyout

Shares rise 20 percent on speculation that USA Network will improve its bid for the portal, or that a competitor will make a better offer.

Shares of Lycos rose 20 percent on speculation that USA Network will sweeten its bid for the company or a competitor will make a better offer.

The portal rose 17.875 to 108.8125, its biggest gain in nearly two months. CMGI, the Internet venture-fund company that is the largest Lycos shareholder, rose 13.625, or 6 percent, to 229.625. Since Friday, that stock has risen 23 percent.

CMGI has said it won't support USA Network's plan to combine its online properties with Lycos because CMGI doesn't like the terms. Some investors and traders are speculating that CMGI may have found another bidder or that USA Network will raise its offer so Lycos shareholders receive as much as 45 percent of the new combined company rather than 30 percent.

"Lycos is trading more on rumors and innuendo than anything else at this point," said Ryan Jacob, portfolio manager of the Internet Fund. "Given that this situation will not be rectified until June or July, we should expect more of the same."

USA Network and Lycos declined to comment.

Headed by Barry Diller, USA Network said in February that it will acquire Lycos and combine it with USA's home shopping, ticketing, and online businesses. But in March, CMGI chief executive David Wetherell resigned from Lycos's board, saying the terms of USA Network's bid weren't adequate. CMGI also hired investment banker Morgan Stanley Dean Witter to seek alternatives and other bidders.

Lycos shareholders will meet in July to vote on the USA Network offer. Some analysts and investors have said that CMGI, betting that the USA Network bid will be rejected by shareholders, will wait until after that meeting to unveil any alternative bid for Lycos.

"I think the likelihood that another deal will come through is high," said Needham & Company analyst Ken Winston. "It's the last of the portals, and Wetherell is very involved right now."

CMGI shareholders will vote May 13 on whether to increase the number of authorized shares of common stock to 400 million from 100 million, according to CMGI's most recent proxy filing. The increase in shares is necessary for CMGI to complete a 2-for-1 stock split that it announced last month. Analysts have said the new shares also could be used to acquire the Internet search service.

Wetherell may be trying to raise the value of CMGI shares in order to buy Lycos outright, a move he may make to stop USA Network's proposed purchase of the Internet service. CMGI stock has risen 69 percent since it last split its shares 2-for-1 on January 11.

Officials at Andover, Massachusetts-based CMGI weren't available to comment. CMGI will split its shares May 27 to shareholders of record May 13.

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