June 22, 2004

Spanish Internet firm Terra Lycos has received four offers for its U.S. portal Lycos, a company source said on Tuesday.

"We are weighing the sale of Lycos. No decision has been taken yet but Terra has four offers and we expect a decision will be taken in the short term," the source told Reuters without giving further details.

Terra, a subsidiary of Spanish telecoms giant Telefonica, bought Lycos for $12.5 billion in an all stock deal in May 2000, near the height of the Internet boom. Its book value today is 75 million euros ($91 million).

Terra, Europe's third largest Internet service provider, posted first quarter earnings before interest, tax, depreciation and amortisation (EBITDA) of 0.7 million euros, its second quarter of positive EBITDA after years of losses.

It expects to make its first net profit next year. Despite the huge drop in Lycos's value since Terra bought it, the sale of the U.S. unit could have a positive effect on Terra's earnings as the Spanish firm wrote off goodwill on the initial purchase in 2002, the source said.

The same source said Terra does not plan to make an offer to buy out small shareholders and delist the stock in the short term.

Telefonica, which owns 75 percent of Terra, launched a bid for 100 percent of the Internet firm last year but had to abandon the full takeover as small shareholders were reluctant to part with their Terra stock at the price offered.

Lycos is undergoing a restructuring to turn itself into a paying subscription site. It said in February the process would affect 20 percent of its staff in the United States.

At that time, it had 420 U.S. staff. The company source also confirmed media reports that Terra would increase the services it offers through an accord with search engine leader Google Inc.

The source did not give any further details on the proposed deal. The source said the accord would increase Terra's revenues and help it reach its objective of a positive operating result this year and a net profit in 2005.

Shares in Terra Lycos were up 0.8 percent at 4.97 euros at 0940 GMT.

Source: F-T.com

        

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