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CMGI severs Engage ties

The once high-flying Internet incubator announces that it is divesting its stock and debt in Internet advertising company Engage.

Embattled Internet company CMGI announced Monday that it is divesting its stock and debt in Internet advertising company Engage.

The move comes as CMGI, the once high-flying Internet incubator company, struggles to right itself with a new strategy of investing in electronic business and fulfillment companies. When CMGI posted its third-quarter earnings in June, it also cut its revenue forecast for the year and widened its anticipated loss.

CMGI, which once saw its stock trade in excess of $160 a share, has struggled to rise above $1 since May. It had a brief surge in late August, when its shares soared to 77 cents a share from 31 cents over a two-day period.

CMGI closed down 3 cents, or 5.6 percent, to end the day at 51 cents Monday.

Under the agreement, CMGI transferred all of its Engage stock to the company and canceled outstanding debts. In return, CMGI received $2.5 million in cash and an agreement to receive up to an additional $6 million via IOU payments due in a couple of years and also through receiving a portion of Engage's profits. CMGI also received a warrant to acquire up to 9.9 percent of Engage's stock at 48 cents a share.

Last May, CMGI made an offer to buy the remaining shares of Engage that it didn't already own. But it withdrew its offer a month later, citing the inability to reach agreement with Engage's management over its future business strategy.

Engage's stock was delisted by the Nasdaq last month, making it more difficult for investors to gauge the value of the company at any given moment. It now trades over the counter.