Diller buying Lycos for Net plan // Deal expands reach of retail, ticket site

NEW YORK USA Networks Inc., the media company headed by BarryDiller, said Tuesday it will acquire No. 3 Internet search directoryLycos Inc. and combine it with USA's home shopping, ticketing andonline businesses.

The transaction will create a company called USA/LycosInteractive Networks Inc. The companies didn't disclose specificterms of the purchase. Lycos' stock fell 26 percent amid concernDiller and USA Networks are getting the best of the complextransaction.

USA/Lycos would put veteran Hollywood executive Diller in theforefront of online commerce, combining his Home Shopping Network andTicketmaster Online-Citysearch Inc. with Lycos. Diller helped createNews Corp.'s Fox television network and built his cable televisionchannels into a $2.8 billion annual business.Diller's company will control 61.5 percent of USA/Lycos, giving"USA Networks shareholders a bigger premium for asset than Lycos,"said Vinton Vickers, an analyst at ING Baring Furman Selz LLC.Lycos fell $33 to $94.25 and Ticketmaster dropped $15.50 to$42.25; USA Networks rose $3.63 3/4 to $41.62 1/2.Seagram Co., which owns 45 percent of USA Networks through alimited liability company, rose 75 cents to $47.63 3/4.The companies, which expect the transaction to be completedwithin eight months, valued the transaction at $22 billion.Diller is expanding USA Network's direct retail sales businessfrom television to the Internet, while giving Lycos a media partnerand established retailer to better compete against larger Internetrivals."It's easy to slap up a Web page. It's awfully hard to serveone," Diller said on a conference call. "When (the transaction) isclearly understood, everyone will say `Wow!' "In exchange for the 61.5 percent of the combined company, Dillerand USA Networks are contributing Home Shopping Network, Ticketmasterand other Internet assets.USA/Lycos, which will have sales of more than $1.5 billion, willbe 30 percent owned by Lycos shareholders. Ticketmastershareholders, other than USA Networks, will own the remaining 8.5percent.The new company will reach about 30 million Internet users and70 million television homes.Diller, long a believer in the marriage of electronic commerceand television, will serve as chairman of USA/Lycos. Lycos PresidentBob Davis will be president and chief executive officer.