Spain’s Internet service provider, Terra Networks, announced that merger talks with U.S. Lycos had been successfully concluded and that the two companies were set to merge.
Terra, the Internet subsidiary of Spain’s Telefonica, will acquire Lycos in an all stock transaction valued at over $12 billion, thus becoming the world’s third largest Internet portal network behind AOL and Yahoo.
The new company, to be called “Terra Lycos,” will provide services in over 37 countries, building on Lycos U.S. presence, and Terra’s strong position in Spain, Mexico and Brazil. The combined company will have an estimated 50 million users, who view on average 175 million web pages a day.
Behind the deal are two European powerhouses, Spain’s Telefonica, headed by the flamboyant Juan Villalonga, and German media giant Bertelsmann, which has agreed to purchase $1 billion worth of advertising over the next five years.
Bertelsmann, which already has a joint venture with Lycos in Europe, will remain a significant shareholder in Terra Lycos, and has agreed to provide internet content to the new group from its stock of television, music and films on preferential terms.
Lycos recently concluded an arrangement with Lloyd’s TSB, the U.K.’ largest bank, to provide its customers with free internet service, and further on-line initiatives, including insurance services, can be expected.
Villalonga is expected to become chairman of the new company, but Lycos head Bob Davis will remain as CEO of the joint venture, which will be headquartered in the U.S.
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