Netscape buyout vote in March

In a prospectus filed with the Securities and Exchange Commission, Netscape's board of directors asked shareholders to accept a merger that will give them .45 shares of AOL for every Netscape share they hold, as previously reported. Counting AOL's stock split, which goes into effect February 22, shareholders will get .9 shares of AOL for every Netscape share.

Based on AOL's closing price of 153 today, Netscape officers and one of its board members will hold a sizable chunk of change.

Netscape shareholders will convene on Wednesday, March 17, in Santa Clara, California, to vote on the proposed merger, which would make Netscape a wholly owned subsidiary of AOL.

The merger, however, is still subject to approval by the Justice Department and Federal Trade Commission approval. The waiting period is expected to expire February 28.

The proxy gives a brief glimpse into the behind-the-scenes of the deal, which began August 26.

While Netscape had long been on AOL's list of firms for possible investment or acquisition, emissaries from the two companies first started discussing the merger in late August, according to the filing. AOL senior vice president of corporate development Miles Gilburne met with Peter Currie, executive vice president and chief administrative officer at Netscape, and Mike Homer, head of Netscape's Netcenter portal operation, at Netscape's campus.

In early November, over the course of three days, high-level talks including Barksdale, Homer, and Andreessen from Netscape and chief executive Steve Case and chief operating officer Bob Pittman from AOL were held, culminating in a tentative agreement reached November 17.

Should the deal go through, Netscape cofounder James Clark will find holdings in excess of 14.4 million Netscape shares worth more than $993 million. And James Barksdale, Netscape's CEO, will find his 5 million shares worth about $351 million.

Meanwhile, Netscape cofounder Marc Andreessen's 1 million shares are valued at $70.8 million under the merger deal. And Netscape director John Doerr, who holds 429,750 shares, will find his holdings worth $29.6 million under the transaction.

In justifying the merger to its stockholders, Netscape cited the company's prospects of going it alone or joining forces with other potential buyers or investors.

The cost of the merger deal is estimated between $50 million to $70 million, including fees for lawyers, investment banks, accountants, and others involved in the facilitating the transaction. If the merger succeeds, Morgan Stanley will earn more than $16 million for representing Netscape in talks, according to the prospectus.

Other costs are expected for employee retention and "work force reductions." AOL has kept mum on possible layoffs. On the retention front, the company has pledged an extra month's salary to Netscape employees who choose to stay.

As previously reported, Barksdale will take a seat on AOL's board of directors. Andreessen, Netscape's vice president of products, will become chief technology officer at AOL. (See related story) Other executives at Netscape are negotiating positions with AOL, according to the prospectus.

The prospectus outlined some details of Sun Microsystems' involvement in the deal. Sun will buy remote dial-up network access services from AOL.

Sun revealed the nuts and bolts of its billion-dollar deal with AOL in a filing made public last week.