Now it really gets interesting. CMGI (Nasdaq: CMGI) CEO David Wetherell resigned from the board of Lycos (Nasdaq: LCOS) on Tuesday to protest Lycos’ proposed merger with USA Networks (Nasdaq: USAI).
After further consideration, it is my opinion that the terms of the USA/Lycos transaction are inadequate for Lycos shareholders,” Wetherell said. As such, I am resigning from the Lycos board in order to be free to explore the best options available to Lycos shareholders, including the possibility of Lycos remaining independent.”
CMGI is the largest shareholder of Lycos, owning nearly 20 percent of the company. Lycos stock was up nearly 15 percent, closing up 12-3/8 to 96-1/4 after the news on Tuesday, while CMGI stock shed 5-1/4 to 194-7/16. Wetherell’s departure muddies up an already murky situation.
Wetherell has hired Morgan Stanley to help CMGI approach other shareholders about demanding a higher sale price for Lycos, and he told the Wall Street Journal that an outright purchase of Lycos could be a possibility. This is interesting, because there’s the possibility of CMGI getting into a bidding war with Barry Diller’s USA Networks.
This isn’t at all a ridiculous notion. If USA Networks, which has a market capitalization of just under six billion dollars, can buy Lycos, then CMGI, which has a market cap of just under nine billion, also surely can. Lycos was worth about four billion dollars when the market closed on Tuesday.
Either way, CMGI could win, because Lycos could get sold at a premium, which is all CMGI seemed to want in the first place.