Excite Chello deal reached
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July 18, 2000: 3:25 a.m. ET
Non-U.S. Internet access units of AT&T, Holland's United Pan-Europe merge
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NEW YORK (CNNfn) - Dutch Internet service provider Chello Broadband NV agreed Tuesday to merge with the non-U.S. operations of ExciteAtHome Corp., creating a market leader in high-speed Internet access outside North America.
The merger pulls the plug on a long-planned, but twice-delayed, stock market listing for Chello, Europe's top provider of "broadband" or high-speed Internet access. The new company, Excite Chello, will operate in 15 countries in Europe, Asia and Latin America and has the exclusive right to serve some 30 million cable-connected homes.
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CNNfn's Jim Boulden reports from London on the Excite-Chello deal.
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ExciteAtHome parent AT&T Corp. (T: Research, Estimates), AT&T subsidiary Liberty Media, and UnitedGlobalCom Inc., which controls Chello, will invest 400 million, or $375 million, in the new company. The owners expect to float a 10 percent stake in Excite Chello by the end of this year or early in 2001.
The future of Chello has been the subject of speculation since June, when its parent, cable operator United Pan-Europe Communications NV, shelved for a second time a planned initial public offering of shares in the unit.
ExciteAtHome chief executive George Bell told CNNfn that Tuesday's merger with Chello now increases the prospects for an IPO. [AIF 279 KB] or [WAV 279 KB]
AT&T subsidiary Liberty Media Group (LMG.A: Research, Estimates) agreed to contribute about 200 million in the form of a loan convertible into shares in the new company. ExciteAtHome, also a unit of AT&T, will invest 100 million in the new venture, as will UPC. Last month, Liberty bought a stake in UPC's parent, Denver-based UnitedGlobalCom Inc. (UCOMA: Research, Estimates). The companies didn't release any further financial details of the merger.
"This strategic investment complements our other broadband and media interests and further strengthens our already close relationship with the United Group," John Malone, Liberty Media's chairman, said in a statement.
Analyst Doug Shapiro, of Banc of America Montgomery, said the deal -- which will serve over 300,000 broadband subscribers and a global Internet protocol backbone network -- increases the footprint of both companies.
"This business requires scale and both can this from the transaction," he said. "They realized that the whole is greater than the parts."
Published reports have valued the new venture around $5 billion, which could mean the company's IPO will raise roughly $500 million.
In fiscal 1999, ExciteAtHome reported revenue of $336.96 million, but the company would not disclose how much its international units generated.
ExciteAtHome (ATHM: Research, Estimates) rose 1/8 to 19-11/16 in Nasdaq trading on Tuesday.
Executive lineup
George Bell, chairman and CEO of ExciteAtHome, and his UPC counterpart Mark Schneider will be co-chairmen of the new company. Roger Lynch, president and CEO of Chello, will continue in that role at the merged entity.
AT&T has long been exploring its options for ExciteAtHome, which has hemorrhaged cash despite the prospect of strong demand for high-speed Internet access in the future.
ExciteAtHome, formed out of the merger of access provider AtHome and Web portal Excite, has been plotting to expand internationally.
For its part, Chello is the current European leader in high-speed Internet access. Combining with ExciteAtHome's international holdings would give the enlarged company a platform from which to expand its global footprint.
In postponing the Chello IPO, UPC said it wanted to give the Internet access provider time to hold talks with possible strategic partners. Some experts speculated that this might include British cable firm Telewest Communications (TWT), in which Liberty Media owns a 24.6 percent stake.
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Chello
ExciteAtHome
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