Terra Networks to Acquire Lycos

Posted on May 17, 2000

Terra Networks, S.A., a leading provider of Internet content and services to the Spanish- and Portuguese-speaking world, and Lycos, Inc., an Internet portal, have announced a definitive merger agreement under which Terra will acquire Lycos. The transaction will create a global Internet company, to be called Terra Lycos, Inc. The company will be built on a platform that capitalizes on the convergence of Internet services, new media, branded content, ecommerce, and communication technologies.

As part of the agreement, Terra Lycos has entered into a broad strategic relationship with Bertelsmann, a large media company in the world with operations in 54 countries. This alliance builds on the existing Lycos-Bertelsmann joint venture in Europe, Lycos Europe, of which Bertelsmann will remain a significant shareholder. Under the expanded relationship between Bertelsmann and Terra Lycos, Bertelsmann has entered into a $1 billion, five-year commerce agreement for the purchase of advertising, placement and integration services from Terra Lycos worldwide. Additionally, Terra Lycos will also gain access to Bertelsmann's catalogue of books, music, television, film and other media content, on preferred terms. Bertelsmann and Terra Lycos will also be working cooperatively to develop platforms for digital delivery of both music and books.

Terra Lycos will also own 49% of a new wireless joint venture being established in partnership with Telefonica. In addition to Bertelsmann's content, Terra Lycos will also have access to all of Telefonica's media content. Telefonica is the largest broadcaster and the second largest pay television operator in Spain and Argentina, where it also owns leading radio stations. Telefonica recently announced the acquisition of Endemol Entertainment, a leading European media company.

Upon completion of the merger, Juan Villalonga, chairman and chief executive officer of Telefonica and chairman of Terra, will serve as chairman of Terra Lycos, and Bob Davis, president and chief executive officer of Lycos, will be chief executive officer. Abel Linares, chief executive officer of Terra, will be chief operating officer, and Ted Philip, chief financial officer of Lycos, will be chief financial officer. The Terra Lycos Board of Directors will have 14 members, including Mr. Villalonga and 10 other Terra designees and Mr. Davis, Mr. Philip and one other Lycos designee. Upon closing of the transaction, Mr. Davis will also join the Board of Telefonica Media, the company's media subsidiary.

Mr. Villalonga said, ``The combination of Terra and Lycos, supported by strategic relationships with Telefonica and Bertelsmann, creates a global Internet and new media powerhouse with a scale and global footprint unmatched by any other Internet or media company in the world. Our combination brings together many complementary strengths that we believe will enable Terra Lycos to generate consistently higher growth in revenues, cash flow and users than either company could expect to achieve independently. The result will be a company uniquely positioned to provide compelling content and functionality for its users, targeted access to large and attractive demographics for its advertisers, attractive opportunities for its employees, and strong growth for its shareholders.''