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Infoseek shareholders approve Disney deal

With the vote, Disney will acquire 43 percent of the portal for approximately $70 million.

After suffering a series of financial analyst downgrades, a major shareholder divestment, and industry skepticism, Infoseek shareholders today voted in favor of Walt Disney Company's equity investment in the Web portal.

With the vote, Disney will acquire 43 percent of Infoseek for approximately $70 million.

Additionally, Disney will apply $139 million toward the purchase of Infoseek warrants, while ownership of Disney's Starwave will be turned over to Infoseek. In return, Infoseek is required to purchase $165 million in promotional support from ABC for the new Go Network portal over five years.

Separately, Infoseek said it is withdrawing its plans for a secondary offering for a new wholly owned subsidiary, due to concerns from the Securities and Exchange Commission. The company, based on discussions with the SEC, plans to refile for an initial public offering for the wholly owned subsidiary.

A company spokeswoman said the process is an administrative step and no changes would be made to the number of shares offered or the offering price.

As previously reported by CNET News.com, the Go Network will blend former Starwave and Disney Web property ESPN.com and ABC News. With today's completion of the June deal, Infoseek becomes the joint venture partner in these properties with Disney.

Go Network will maintain the Infoseek brand as its search engine and transfer some of Infoseek's content channels onto Go. Disney will also power Go's entertainment and family-oriented channels with its own branded content.

The Go Network is expected to launch a preliminary version by the end of the year and roll out the service by March 1999.

While the new portal marries one of the world's largest entertainment companies with an established portal brand, many analysts and observers remain skittish about how well Go Network will compete in a hyper-competitive space dominated by Yahoo and America Online.

A day after Infoseek reported third-quarter earnings 2 cents lower than analyst expectations, investment bank Salomon Smith Barney downgraded the company to "neutral" from "buy," while Deutsche Bank cut its rating to "hold" from "accumulate." Other analysts lamented that the new portal could be an expensive attempt to gather share in a market already dominated by established heavyweights.

Yesterday, Bell Atlantic, once Infoseek's third-largest investor, said it would sell 85 percent of its Infoseek shares, a transaction worth $36 million based on yesterday's closing price.

Nonetheless, other analysts maintained their optimism about Disney's powerful brand and the competency of its sales force. A slow start and losses are expected, they say, but Disney's consumer appeal and promotional potential through its other media properties could push the portal into the hearts of mainstream Americans.

Infoseek will manage the daily operations of Go Network in its Sunnyvale, California, headquarters. Disney's Buena Vista Internet Group chairman Jake Winebaum and Infoseek chief executive Harry Motro will oversee the operation. Former Starwave chief technology officer Patrick Naughton and Infoseek senior vice president and portal site general manager Barak Berkowitz will manage technology and marketing, respectively.

Infoseek will report to an eight-member board of directors, which will include 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; Bill Krause, a former chief executive of 3Com; Robert Iger, president of ABC; Steven Bornstein, president of ESPN; and Winebaum.

CNET News.com's Dawn Kawamoto contributed to this report.