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Intuit buys 19% of Excite

The financial software company will buy a 19 percent stake in Excite for $40 million.

Intuit (INTU) will pay $40 million for a 19 percent stake in Excite (XCIT), prompting the search engine company to cancel a much-anticipated secondary offering.

Excite chief executive George Bell noted the cash infusion more than meets the company's capital needs. The equity investment calls for Intuit to buy 2.9 million shares of Excite common stock. Based on a fixed price of $13.50 per share, the investment is valued at about $40 million.

Talks with Intuit over the equity investment began six to eight weeks ago, as the company determined that the market was favorable to its offering. The deal has been approved by both boards but faces regulatory approval.

Bell's relief over the cash infusion was evident today. "When we announced the secondary [offering], the market was choppy, and it got choppier," he said.

The companies also announced a seven-year agreement to program, promote, and distribute a new online financial channel.

The channel will feature information and services to help consumers organize and manage their personal finances. It will include investment information, stock quotes, service directories, and tracking features.

The new channel will be distributed through the Excite Network--including Excite, WebCrawler, and Magellan--as well as through the Intuit's Quicken Financial Network. Intuit will also promote the channel to Quicken's 10 million consumers.

The companies expect revenue to come from a combination of advertising and fees for transactions for financial products and services, some of which will be introduced this summer.

Intuit CEO Scott Cook added: "This alliance will increase the speed with which we will be able to deliver these solutions and dramatically expand the number of people we can reach."

America Online (AOL) also owns a 19 to 20 percent stake in Excite, roughly comparable to Intuit's holding, Bell said.

Many Internet companies had been watching Excite's effort to launch a secondary offering with a keen eye, contemplating similar moves. And they may still pursue that strategy despite Excite's cancellation.

"Internet companies need a lot of money, and when valuations are attractive, you'll see a lot of companies go and tap the water," said Andre de Baubigny, a vice president at Robertson Stephens, which was going to be the underwriter in Excite's offering. "They will be done on an individual basis based on where the company's valuations are."

Brett Bullington, Excite's vice president of sales and marketing, said companies will need to weigh for themselves which path makes more sense: a secondary offering or a strategic partnership that brings in an equity investment.

And how is the market for finding equity partners?

Bill Harris, an Intuit executive vice president, relayed his experience in striking a deal with Excite. "I had to fight my way through their lobby, where there were big suitcases full of cash," Harris joked.