CitySearch to merge, stalls IPO
CitySearch is postponing its initial public offering because it has entered into an agreement to merge with Ticketmaster Online.
The combined company will be named Ticketmaster Online-CitySearch. Upon completion of the transaction, former CitySearch shareholders will own 42.5 percent of the new company. USA Networks, which already owns 12.9 percent of CitySearch, will hold 62.5 percent of the merged company.
USA Networks has invested $50 million in a convertible debt security to fund CitySearch's--and now also the merged company's--rapid expansion, up until it holds an IPO.
Ticketmaster approached CitySearch about a month ago with a proposal to merge, after a long relationship between the companies, said CitySearch CEO Charles Conn.
"We talked about consolidation in the industry and creating more of a powerhouse," he said.
The synergy between the companies is clear. CitySearch provides local entertainment and restaurant guides on the Web funded by merchants, and Ticketmaster Online allows computer users to purchase event tickets instantly and without a middleman.
"I think possibly the last frontier of size to be organized on the Internet is the local city site," Barry Diller, chairman and CEO of USA Networks, said in a statement. "We believe that most people's interests lie within the general limits of the cities in which they live. We hope this combination of assets, together with the cheering help of USA's local broadcast stations, will create critical mass in this growing Internet area.''
CitySearch, which was expected to set its IPO target price today, said the deal with USA Networks was a better business move than its previously scheduled offering. The company's IPO was expected to pale in comparison to those recently floated by GeoCities and Broadcast.com, both of which skyrocketed on their first days of trading (See related story).
"From the standpoint of CitySearch's IPO, the strategic benefits of the merger are even more compelling than the prospect of pursuing an independent path as a public company," Conn said. "The logic of this combination was too attractive to pass up."
Conn acknowledged that the decision to delay CitySearch's IPO " to walk away from an [IPO[ order book that was over-subscribed," as he put it, was an extremely difficult one for the company's board. He noted, however, that it was much easier to merge before CitySearch went public, rather than after.
He added that the current turmoil being experienced by markets worldwide had little impact on the decision to delay the IPO because other Internet IPO's, such as that of GeoCities, succeeded despite the current economic climate.
Other companies, however, have opted out of going public in the face of shaky markets. Push-technology pioneer PointCast, for example, decided against proceeding with its IPO in July, in part to discuss possible partnerships with other companies.
Yesterday, Web advertiser 24/7 Media postponed setting a target price for its IPO, and is scheduled to do so today. But he company's offering seems to be getting an even more skeptical reception than CitySearch's.
One of 24/7 Media's units, Interactive Imaginations, was saddled with legal problems that ultimately were dismissed, but not before the legal fees associated with them sapped the company's finances. Nevertheless, the company still plans to go through with its IPO.
Ticketmaster Online-CitySearch said it plans to file for an initial public offering immediately following the completion of the merger.
Conn will become CEO of the merged company, while Alan Citron, currently president of USA Networks Interactive, will become chairman of Ticketmaster Online-CitySearch.
Since its founding in 1995, CitySearch has expanded into 13 major cities, with 4 more expected to be added in 1998. The two companies anticipate no staffing changes at CitySearch or Ticketmaster Online as a result of their combination.
Ticketmaster and CitySearch will continue to operate their individual sites on the Internet.
The transaction is subject to standard regulatory approval, as well as CitySearch shareholder approval, and is expected to be completed during the third quarter.
CitySearch posted a loss of $16.5 million for the six months ended June 30, compared with a loss of $18 million posted a year earlier.
Janet Kornblum contributed to this report.