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CompuServe up on new rumors

The online service's stock rises nearly 5 percent after new rumors surface of an imminent buyout, with WorldCom emerging as a leading candidate.

CompuServe (CSRV) stock rose nearly 5 percent after new rumors of an imminent buyout surfaced today.

Speculation reached a fever pitch this evening, with telecommunications giant WorldCom (WCOM) emerging as a possible buyer.

Bloomberg reported this afternoon that the online service will be sold to WorldCom for $1.2 billion, or $13 per share. The report stated that the board would consider the buyout at a meeting Sunday and that a deal could be announced Monday.

Rumors about possible suitors for CompuServe have circulated for weeks, but WorldCom's emergence as a lead candidate was a surprise. Just yesterday, the Wall Street Journal reported that WorldCom and America Online were teaming up as one possible buyer, but the paper indicated that New York-based investment banking firm Welsh, Carson, Anderson, & Stowe was at the top of the list.

CompuServe's stock gained almost five percent in heavy trading to hit 13-1/2, up from yesterday's close of 12-7/8. More than 1.3 million shares exchanged hands, nearly triple its average trading. The stock peaked to its highest price since April, when speculation was high that AOL might acquire the competing online service.

None of the parties involved in the latest rumors would comment on the possibility of a WorldCom acquisition of CompuServe. They acknowledged only what has been common knowledge for months: that the online service is on the block.

H&R Block now owns 80 percent of CompuServe. It had spun off 20 percent of the online company but delayed spinning off the remainder when CompuServe's value began to drop.

H&R Block spokeswoman Linda McDougall would not comment this evening on WorldCom as a prospective buyer. "We have never stated a timetable, and we are still not setting a time frame for separating CompuServe from H&R Block," she added.

Gary Brandt, who represents WorldCom investors, also refused to comment on rumors or speculation, as did AOL.

CompuServe confirmed that it is in discussions with a prospective merger or acquisition partner but would not elaborate. "The situation is that we are still in discussions, and anything beyond that at this point is speculation," spokesman Steve Conway said.

Analysts tonight had mixed opinions about a possible WorldCom buyout. While some thought it made sense, others said the price sounded too low to be true. They also wondered how such precise information would "leak out" when the lid has been sealed so tightly for so many months.

Joe Arsenio, an analyst for Hambrecht & Quist, said the buyout would "represent an even greater departure from WorldCom's historic interests that have been extensively involved with telecommunication services. The deal is going to bear closer scrutiny."

For CompuServe customers--especially those who have corporate accounts--WorldCom would be an ideal buyer because it owns its own fiber network and could draw better customers.

Reporters Courtney Macavinta and Suzanne Galante contributed to this report.