Disney-Infoseek details emerge
Infoseek releases details about its deal with Disney, including financial arrangements, valuation, and management appointments.
One of the more surprising disclosures was how long the deal had been in the works--as far back as February. In June, Disney bought a 43 percent stake in Infoseek to help build a Web portal. It came about two months after Disney bought Starwave, the Internet technology company.
This three-way deal got its legs February 10, documents show. Executives of Infoseek, Disney, and Starwave met in New York to discuss potential opportunities for the companies to establish a partnership for Internet-based services.
About two weeks later, Disney executives added a new twist to the talks by saying they wanted to buy Infoseek. Those talks broke down, but Disney still bought a minority stake in the Net search directory after the Starwave buyout. The three companies' product, a Web site dubbed Go Network, will provide news, sports, and information from Disney properties, including ABC News and ESPN, among other content.
Infoseek and Starwave shareholders are scheduled to vote on the proposed merger November 18. If approved, the deal is expected to close at that time.
Under the arrangement, Infoseek would swap 0.26 of its shares for every share of Starwave common stock. Infoseek plans to exchange 25.5 million shares, which would value its Starwave purchase at $524.3 million based on Infoseek shares closing at 20.5625 today. In valuing the acquisition for the parties, investment banker Merrill Lynch calculated Starwave's interest in the ESPN joint venture on a standalone basis of between $375 million and $500 million after the merger and its interest in the ABCNews.com joint-venture of between $60 million and $100 million, according to the proxy statement. The investment banker valued the revenues from the Go Network at between $300 million and $350 million.
Disney agreed to purchase 2.64 million shares of Infoseek at $26.50 a share--a premium over current prices--and a warrant to buy another 15.7 million shares. Disney will be spending $70 million for those shares, but it also will issue a note for $139 million to be applied toward their purchase of the Infoseek warrants.
Disney initially will hold a 43 percent stake in Infoseek, but it will be able to increase its stake to 49.9 percent during the next three years.
Infoseek estimates it will incur $7 million in charges for the mergers over the December and March quarters, Wright said.
The proxy also detailed the organization and management structure of Infoseek, which will run Go and Starwave.
Infoseek will report to an eight-member board of directors, led by chief executive Harry Motro; Infoseek founder and chairman Steve Kirsch; John Zeisler, a partner with venture capital firm Interwest Ventures; Matt Stover, group president of information services at Bell Atlantic; and Bill Krause, a former chief executive of 3Com who now heads scanner maker Storm Technology.
The remaining three members will consist of Disney executives Jake Winebaum, chairman of Buena Vista Internet Group; Robert Iger, president of ABC; and Steven Bornstein, president of ESPN.
The proxy also listed Infoseek's new daily management team, which combines Starwave and Infoseek executives--but leaves others out. As reported, Starwave chief executive Mike Slade is expected to leave the company after the deal closes, along with Starwave chief operating officer Curt Blake.
Slade and Blake join a list of high-profile executives leaving or have left since the inking of the deal.
Last month, Tom Phillips, former president of ESPN Internet Ventures left the company. Last June, a number of former executives also left Disney Online, including president Richard Wolpert, vice president David Vogler, and Susan Wyland, vice president Family.com.
With the release of the proxy, the Infoseek team now faces the daunting task of launching a portal offering considered by many as late in the game.
"We're glad to get one more stage of this transaction behind us," said Harry Motro, Infoseek chief executive.
Although the project combines many widely visited properties on Web, it has considerable ground to make up in areas such as brand awareness and audience base--two areas where portal leaders Yahoo and America Online have already established beachheads.