Yahoo To Buy GeoCities

By SERGIO G. NON, TechWeb

The most visited Web portal site said it plans to buy the biggest online community in a $3.6 billion stock swap.

Yahoo today confirmed newspaper reports about an agreement to buy GeoCities. Under the agreement, Yahoo will trade about 10.6 million shares of its stock in exchange for 31.4 million GeoCities shares. At Wednesday's closing prices, the deal is worth almost $3.6 billion, or 52 percent higher than GeoCities' total market capitalization of almost $2.4 billion.

All GeoCities stock options, about 8.95 million, will be converted into almost 3.03 million Yahoo options. Including the options' value, the total acquisition is valued at $4.58 billion.

GeoCities, which offers free space for noncommercial Web sites, boasts of more than 3.5 million members, making it single largest online community site on the Web. Last year, Lycos bought two GeoCities rivals, Tripod and Angelfire.

Broad Web portal companies such as Yahoo, Excite, Infoseek, and Lycos are constantly looking for new content and services to keep users on their sites longer. That not only allows for higher advertising rates, but theoretically, also gives portals a better chance of boosting their e-commerce dollars.

Yahoo said it will take the Web-page creation tools and content offered through GeoCities and distribute them through other Yahoo sites, such as classifieds and auctions. The companies also said they plan to pitch Yahoo shopping and other services to GeoCities members.

Integrating GeoCities might be easier than in other acquisitions. Yahoo already holds a minority interest in GeoCities, and the companies have cross-promotional deals.

The purchase will be accounted for as a pooling of interests. The deal, expected to close in the second quarter of this year, requires approval from government regulators and GeoCities shareholders. Yahoo said it will record an acquisition charge in its second quarter.

Today's deal marks the third powerhouse Web acquisition in two months. Earlier this month, @Home announced plans to buy Excite for $6.7 billion. And in late November, America Online said it would buy Netscape for $4.2 billion.