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Wired, Lycos move to pacify shareholders

Modifies stock-swap deal to favour founding stockowners

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Lycos and Wired Ventures, the company launched on the back of Wired magazine before the latter's sale last year to Conde Nast, moved last week to head of shareholder discontent over the allocation of shares when the two businesses merge. Lycos' takeover of Wired has been largely hidden by the higher profile merger with USA Networks. That merger collapsed earlier this month, as The Register last November predicted it would. After the sale of the loss-making Wired, the parent company focused its efforts on its popular Wired News, Hotbot, WebMonkey and Suck.com Web site, and that popularity soon drew the attention of Lycos, keen to but more sites to win its user base war with arch-rival Yahoo! The original merger deal, filed last October, was centred on a stock-swap. However, it soon emerged that the complex acquisition plan would yield to some of Wired's largest backers a rather higher return on their investment than everyone else would get. Essentially, the deal involved a recapitalisation which reduced the value of the company's founding shares, and that in turn allowed more recent investors to expand their share of the company at the last minute. Many of Wired's founding shareholders weren't too keen on the deal, and threatened all sorts of legal action to ensure they got their fair share (see Lycos' Wired takeover under threat). That in turn threatened the USA Networks deal, since a successful Wired acquisition would have added Web properties USA Networks was itself keen to own. Indeed, the delay in getting the Lycos-Wired deal to move forward may well have played a part in the collapse of the USA Networks merger. The new arrangement, filed with the US Securities and Exchange Commission on Thursday, will see greater emphasis placed on founding shareholders' stakes. That should please the investors -- according to inside sources cited by Red Herring magazine, that's why it was done -- but the real winners are Wired founders Louis Rossetto and Jane Metcalfe, who both to make $95 million from the takeover -- almost a third of the $300 million Lycos is paying for it. ®

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