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Monday, November 23, 1998
"Let us be thankful for the [F]ools. But for them the rest of us could not succeed." -- Mark Twain
AOL Close to Buying Netscape
In what would be the biggest and most significant Internet merger to date, America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> and Netscape Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NSCP)") else Response.Write("(Nasdaq: NSCP)") end if %> are in negotiations regarding a stock swap by which AOL would acquire the Internet browser and software company for about $38.19 a share, based on AOL's closing price Friday. Netscape shares, which closed at $39 3/16 Friday, ratcheted up about $10, or 34%, in heavy trading last week after The Wall Street Journal reported that the two companies were in talks regarding "a wide range of new partnerships," including a possible investment by AOL in Netscape. The deal now on the table would also involve enterprise software company Sun Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %>, which would license and market Netscape's electronic commerce software.
The merger would eliminate Netscape the Internet pioneer, though not the brand name, and give AOL -- already the unquestionably dominant online services provider -- a larger presence on the World Wide Web, via Netcenter, to compete against portals such as Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> and Microsoft's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> MSN network. The deal would also expand AOL's reach beyond its subscriber base of 14 million consumers to encompass more business customers. Though Netscape still maintains the largest share of the Internet browser market, it has been rapidly losing market share to Microsoft's Internet Explorer, in part due to a pact between AOL and Microsoft to bundle Explorer with AOL's software in exchange for an AOL icon on the desktop of Windows operating systems. AOL reportedly plans to keep Internet Explorer as its default browser.
The Netscape acquisition would certainly make AOL a formidable competitor to Microsoft's Internet media and browser businesses. If the deal goes through, Microsoft likely will argue in its ongoing antitrust trial that the same charges of unfair competition leveled against it should then be directed at AOL, which, of course, acquired its biggest competitor CompuServe and recently added Mirabilis and its ICQ online chat and locator service to its stable of companies. At the same time, the Justice Department may point to the deal -- namely, the demise of Netscape -- as evidence of Microsoft's overwhelming dominance. AOL's alliance with Microsoft foe Sun Microsystems would deal another blow to Microsoft by providing wider distribution of Sun's Java programming technology, which allows programmers to write a single version of software that can run on any operating system.
News to Go
Germany's largest bank, Deutsche Bank AG, is close to acquiring Bankers Trust <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BT)") else Response.Write("(NYSE: BT)") end if %> for about $9.7 billion, or $93 a share, in cash, The Wall Street Journal reported. The price tag would represent a 20% premium to Bankers Trust's closing price Friday of $77 1/4. The deal, which has been rumored for many weeks, would create the world's biggest financial services company in terms of assets.
In its latest effort to spurn a merger proposal from aerospace and auto parts maker AlliedSignal <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ALD)") else Response.Write("(NYSE: ALD)") end if %>, electronic connectors maker AMP Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMP)") else Response.Write("(NYSE: AMP)") end if %> has found a "white knight" in diversified manufacturing and service company Tyco International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TYC)") else Response.Write("(NYSE: TYC)") end if %>. Tyco agreed to acquire AMP in an all-stock transaction valuing AMP at $11.3 billion, or $51 a share, based on Tyco's closing price Friday of $65 1/16. That's a 13% premium to AMP's close Friday of $45 1/8 and tops AlliedSignal's unsolicited $44.50 a share cash offer.
The nation's second-largest home improvement retailer Lowe's Companies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LOW)") else Response.Write("(NYSE: LOW)") end if %> said it has agreed to acquire Eagle Hardware & Garden <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EAGL)") else Response.Write("(Nasdaq: EAGL)") end if %> in a stock swap valued at about $1 billion, or $29 per Eagle share (a 5.5% premium), giving Lowe's a stronger foothold on the West Coast. Eagle has 32 stores in nine western states. As previously announced, Lowe's plans to open 100 stores in the region in the next three to four years.
Aircraft systems and performance materials manufacturer BF Goodrich Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GR)") else Response.Write("(NYSE: GR)") end if %> said it will acquire aerospace and industrial products maker Coltec Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COT)") else Response.Write("(NYSE: COT)") end if %> in an all-stock deal valued at $20.13 a share (a 12% premium), or $2.2 billion including assumed debt, based on Friday's close. The acquisition is expected to be accretive to BF Goodrich's 1999 earnings and achieve minimum annual cost savings of around $60 million by 2001.
Cable Internet service provider SoftNet Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: SOF)") else Response.Write("(AMEX: SOF)") end if %> announced it will acquire Intelligent Communications Inc., formerly Xerox Skyway Network, for an undisclosed sum, allowing the company to provide high-speed Internet access to small and mid-sized cable companies via satellite instead of traditional phone lines.
After winning a showdown with its pilots union, FDX Corp.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FDX)") else Response.Write("(NYSE: FDX)") end if %> Federal Express said it will proceed with plans to outsource a big chunk of its international flight network and subcontract trucks to ship packages within the U.S. to cut costs. Late last week, the union called off a strike vote after the company signed agreements to outsource its air operations to other airlines.
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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor
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