NEW YORK -- General Electric Co.'s NBC unit agreed to acquire the two-thirds of NBC Internet Inc. it doesn't already own for about $86 million and fold the struggling Web service into its other operations.
Under the terms of the deal, the General Electric unit (GE) agreed to pay $2.19 a share, a 46% premium to NBCi's (NBCI) closing price of $1.50 on Friday. NBC currently is a minority shareholder in NBCi, holding about 38.6% of the company's 64 million outstanding shares.
The deal marks the latest move by a major media company to drastically scale back its Internet ambitions. Walt Disney Co. (DIS) and News Corp. (NWS) also have absorbed their online units, and other media players have pulled plans to sell shares in their online operations to the public. NBCi will immediately begin another round of layoffs as NBC considers how to integrate the company. NBCi currently has about 325 employees.
Senior executives at NBC and NBC Internet said that they had been weighing alternatives for the subsidiary since the beginning of the year, including a sale, a merger with another company, or liquidation. NBCi was created in 1999 when NBC merged several of its Internet assets with Xoom.com Inc. and CNET Networks Inc.'s Snap.com unit.
"The sharp declines in the Internet advertising market convinced us that it didn't make sense to pursue a portal strategy," NBC's chief financial officer Mark Begor said. "We wanted to find a way to maximize shareholder value and wind down the business in the best way possible." NBC will need to sort out NBCi's various Web properties. The NBC.com Web site will fall under the jurisdiction of Scott Sassa, the chief of NBC's West Coast operations. Still to be determined are the fate of some dozen companies, such as Flyswat and GlobalBrain, that NBCi acquired for stock over the course of a $500 million buying binge.
"There's no question that we'll dramatically reduce the scope of the operations and sell some assets," said NBCi's Chief Executive Will Lansing. "But first we'll see how it fits into the NBC strategy." Mr. Lansing will leave the company after seeing it through a transition
In 2000, NBCi lost $661.8 million, or $10.89 a share, on revenue of $122.9 million. Shares of NBCi traded at a year high of $38.56 on April 10, and at a 52-week low of 97 cents.
In its latest round of job cuts announced in January, NBCi planned to cut 150 positions, or about 30% of its 500-person work force. In August 2000, NBCi announced plans to cut 170 jobs, then 20% of its employees.
The transaction was negotiated separately and approved by the non-NBC members of NBCi's board. Dresdner Kleinwort Wasserstein served as financial advisor to the non-NBC members of the board in connection with the transaction. The agreement, which requires customary approval, is expected to be completed sometime this summer.
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