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Zapata reels in Net efforts

The fish-oil processing and food service company says it is backing out of plans to acquire or invest in 31 Internet companies.

Zapata's much-touted Internet efforts have turned into a flash in the pan.

The fish-oil processing and food service company said today it was backing out of plans to acquire or invest in 31 Internet companies.

Zapata, through its subsidiary Zap, had planned to enter the Internet space by creating a portal that its executives had characterized as the "roach motel"--eyeballs check in but they don't check out. The game plan entailed spinning off Zap in an initial public offering.

But as the global markets slumped, especially hitting Internet stocks, Zapata canceled its plans to invest in or acquire such companies as Web community CoolChat, games information site Attitude Network, personal finance and investment Webzine Green, online college resource site GoCollege, and online community Bianca Troll Productions.

Zapata chief executive Avram Glazer could not be reached for comment.

Daniel King, an Internet analyst with LaSalle St. Securities, said Zapata likely had very "high expectations" for a Zap IPO, in order to cancel plans this soon after announcing the plan.

Last May, Zapata splashed on the Internet scene, making an unsolicited bid for Internet directory Excite. Zapata proposed a stock offering valued at $72 a share but it was rejected by Excite. Without missing a beat, the company then went on a quick and highly publicized spending spree, announcing it had entered into acquisition and investment discussions with 31 Internet companies.

Zapata's retreat may have a rippling effect on the Net industry.

"Whenever you take buyers out of the marketplace, it changes the dynamics somewhat," he said. "Those properties that they were considering [acquiring] are likely available now at a lower price. It could lower the valuations of some of their acquisition targets."

Scott Ehrens, an analyst with Bear Stearns, said Zapata's departure from the marketplace should not have any impact on the more established Internet companies.

The company said it is re-evaluating its Internet strategy and it may later resume talks with some of the companies involved. Zapata also said it would continue to operate online magazines Word and Charged.

Dave Rae, founder and chief executive of Attitude Network, said he would be willing to hold talks again with Zapata.

"Our brand is doing well, our company is doing well, so we're not particularly hurt by the discontinuation of Zap," Rae said. "We would have liked the opportunity to participate in Zap. I thought they had a good plan and it was a good opportunity to bring together a lot of the independent publishers in the Internet space. But the market is just not going to let that opportunity happen right now."

He added that Zapata's decision came as no surprise, given the slumping markets. Rae said Zapata held a board meeting yesterday and made its decision to cancel its investment in his company.

"There isn't any payment [they'll give us] relative to them backing out. And there really aren't any hard feelings. We leave the relationship stronger than when we entered it," he said.

In the meantime, Rae said other potential partners are approaching his company.