The merged company, to be called Excite Chello, will have a presence in 15 countries throughout Europe, Asia and Latin America. Excite Chello will have exclusive rights to deliver broadband Internet services to 30 million cable-ready households, as well as set-top box services to 10.5 million homes.
The new company will use the Excite Web portal to power its content and media services, with Chello providing the high-speed Internet access.
As part of the deal, Liberty Media will invest $187 million in Excite Chello in a note convertible into company shares. Excite@Home and United Group, which owns Chello parent United Pan-Europe Communications and UnitedGlobalCom, will invest $93.8 million each in the company. Excite Chello will be equally owned and controlled by Excite@Home and United Group.
Excite Chello will pursue an initial public offering by early 2001, the companies said. Because of the merger, Chello has canceled its own IPO. Chello had planned to go public in May in hopes of raising $369 million, with plans for Microsoft and Liberty Media to purchase a 7 percent stake in the company. But the company postponed its IPO.
For Excite@Home, the deal underscores its efforts to expand its footprint overseas. In recent years, the company has expanded through joint ventures into the Netherlands, Japan, Australia and Germany, with possible plans to step into India and China.
The company has said it will expend a good portion of its marketing resources to boost international subscriber growth. Part of the aggressive international spending stems from the high cost of dial-up Internet access in Europe, which incurs metered charges by the minute. Thus, cable Internet services could not only provide faster service but also cut down on access charges.
Excite@Home and Chello's combined cable broadband services currently operate in 10 countries, with over 300,000 subscribers. The Excite portal also runs local language versions of its service in 10 countries, giving the combined company the potential for expansion in nonoverlapping markets.
As for management of the new company, Roger Lynch, currently chief executive of Chello, will serve as chief executive of Excite Chello. A board of supervisors will be overseen by co-chairmen George Bell, Excite@Home's chief executive, and UPC chief executive Mark Schneider. The board will also include appointees from Excite@Home and the United Group, including Excite co-founder Joe Kraus and UPC president John Riordan. Three independent members will also be appointed, one of which will be Liberty Media chairman John Malone.
"Excite Chello presents a rare opportunity to take everything that we have learned and built over the past six years and use that expertise to accelerate the global broadband market and create an instant leader in the field," Bell said in a statement.