Yahoo acquires privately held eGroups

Larry Dignan
2 min read

Yahoo! said Wednesday it would acquire privately held eGroups, an email group communication service, in a stock swap valued at $428 million.

Under the terms of the deal, Yahoo (Nasdaq: YHOO) will issue 3,428,136 shares of common stock for all of eGroups shares, options, and warrants. At Yahoo's closing price of 125 15/16 Tuesday the deal is valued at $428 million. The deal is expected to close in the third quarter and Yahoo added that it will take an unspecified charge.

EGroups had filed to go public in late March. The company didn't outline a price range or number of shares to be offered, but was hoping to raise a maximum of $75 million. The estimate, however, was only used to determine the fees required by the Securities and Exchange Commission.

For the six months ended Jan. 31, eGroups reported a loss of $12.9 million on sales of $3.46 million.

EGroups' goal was to leverage its user groups, including alumni email lists and affinity groups, to garner revenue from permission-based direct marketing programs, sponsorships and online advertising.

With eGroups in the fold, Yahoo will bolster its communications offering, including mail, messenger and clubs. Yahoo is competing with America Online (Nasdaq: AOL), Microsoft's MSN (Nasdaq: MSN), AltaVista (Nasdaq: CMGI), Lycos (Nasdaq: LCOS) among others to offer communications services and keep users longer.

Yahoo said it will take eGroups 800,000 active email groups and combine them with Yahoo's community and personalized services. Yahoo will also introduce eGroups to its 145 million members and "tightly integrate group email services throughout the Yahoo network of properties."

Earlier this week, Yahoo launched Corporate Yahoo, a portal service for enterprise customers. Yahoo reports its second quarter earnings July 11 and analysts are expecting a profit of 10 cents a share.