BURBANK, CALIF. — BURBANK, Calif. -- Walt Disney Co., the world's second-largest entertainment company, said yesterday that it will buy the rest of Infoseek Corp., combine it with its own Internet assets and create a stock to track the performance of the new company.
Disney will acquire the 57 percent of Infoseek it doesn't own -- valued at about $1.7 billion at yesterday's market price -- by swapping 1.15 shares in the new company for each Infoseek share. Disney will hold a 72 percent stake in the new company, to be called go.com, after the combination and stock sale.
Disney Chairman Michael Eisner is consolidating control over the company's Internet properties while trying to reverse a yearlong decline in earnings and boost Disney shares, which have fallen 29 percent in the past year. The move comes amid criticism that Disney, like other big media companies, hasn't used its well-known name and brands to attract more Internet users.
Sunnyvale, Calif.-based Infoseek's shares fell $5.56 to $45.94 yesterday. Disney's rose 19 cents to $27.81.
Disney will offer shares of the new go.com unit as a tracking stock.
Disney formed its Go Network search directory with Infoseek in January to challenge rivals such as Yahoo! Inc. Even though it's ranked as one of the top five sites on the Internet, the Go Network has been hampered by having two management teams and a lack of a clear focus, analysts have said.
Now, Burbank, Calif.-based Disney can package all of its online assets in one place with one management. Infoseek's chief executive, Harry Motro, is to leave after the merger to spend more time with his family.
"These guys have really got to get nimble, and there's no reason why they shouldn't be able to take advantage of Disney's marketing and promotional clout," said analyst Richard Read of Credit Lyonnais.
It also gives the company a currency for acquisitions and might allow it to better attract and retain experienced Internet executives, some of whom have left for other Internet businesses offering richer stock options.
In addition to Motro, Disney also lost Jake Winebaum, chairman of its Buena Vista Internet Group, who resigned last month to start a new Internet venture.
Disney said the transaction will result in a significant goodwill charge, which Salomon Smith Barney analyst Jill Krutick estimated at about $5 billion. Amortizing that over two years would dilute earnings by about $1.20 a share, she said.
Go.com is expected to generate about $350 million in revenue in the current financial year, with about $200 million of that related to the Internet. That leaves about $150 million, or 43 percent of revenue, to be generated by the Disney catalog, which isn't as fast-growing a business as the pure Internet parts.
Pub Date: 7/13/99