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CompuServe targeted again?
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July 4, 1997: 12:09 p.m. ET
Report: Bertelsmann, AOL team up on sweetened bid for CompuServe
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NEW YORK (CNNfn) - America Online Inc. and German media giant Bertelsmann AG are reportedly preparing a new, sweetened bid for online service provider, CompuServe Inc.
Bertelsmann, which owns a 5 percent stake in AOL, is contributing cash to allow the nation's leading online services provider to raise its offer of roughly $1 billion in AOL stock for CompuServe, the Wall Street Journal reported in its electronic edition on Friday.
The amount of Bertelsmann's contribution couldn't be determined, the article reported.
AOL, which has never publicly confirmed the talks, initially held discussions in early April to buy CompuServe, which is 80 percent-owned by H&R Block Inc. However, the parent company was said to be holding out for a higher bid.
At least one analyst questioned the valuation of CompuServe given its current business fundamentals.
"I'm sure AOL will pay a premium but the reality is that ... [CompuServe has] no clear competitive advantages in the market. It'd be just a long, tough investment for H&R Block to pull CompuServe out of the doldrums," said Tony Perkins, editor-in-chief of Red Herring magazine.
With the backing of Bertelsmann and its strong European presence, AOL strengthens its chances of consummating the CompuServe offer, the Journal reported.
If consummated, the deal would more than double AOL's customer base in Europe, a market dominated by Deutsche Telekom AG's T-Online service. In the U.S., the deal would give AOL control of more than half of all online accounts. (292K WAV) (292K AIFF)
AOL and CompuServe weren't available for comment. Bertelsmann declined to comment when reached by CNN.
However, Bertelsmann did dispute another report in Frankfurter Allgemeine Zeitung saying it was planning to bid for U.S. publishing giant McGraw-Hill Inc. "There is nothing in that," a spokesman was quoted by the Reuter news service as saying.
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