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08.12.00 09:49:08
Tiscali Clinches Cut-Rate Deal for World Online

The Italian ISP closes its all-stock deal for its Dutch rival for the discount price of $3.91 billion. The purchase will create Europe`s second-biggest ISP.
By Bernhard Warner















World Online Raided by Dutch Authorities
Europe`s Biggest ISP Merger to Be Refinanced?

Why the Tiscali-World Online Deal Wasn`t News in Germany






The ambitious Italian telco giant Tiscali has clinched its cut-rate takeover of the Dutch ISP World Online with a merger deal valued at 4.4 billion euros ($3.91 billion).


The price represents a sizeable discount from the offer price when the acquisition was originally announced on Sept. 7. At the time, the all-stock deal was valued at 5.9 billion euros ($5.1 billion). The price tag deteriorated by 23.7 percent in the ensuing months as share prices of both firms sank in tandem with Europe`s slumping ISP market.


A number of World Online shareholders complained that the deal was undervalued, and it was feared that fewer than a required 80 percent would approve the purchase. However, fewer than 4 percent of World Online shareholders rejected the deal.


In the end, World Online shareholders were attracted by the value of 15.35 euros ($13.69) that the deal puts on their shares, a 26 percent premium over World Online`s Thursday morning share price of 11.35 euros ($10.12). Shares of World Online have been in steady decline since the firm`s March IPO. Soon after the public offering, it was revealed that company founder Nina Brink had sold off a portion of her stock prior to the floatation. World Online shares have never recovered.


The acquisition gives Tiscali a total of 6.8 million customers (just 3.75 million subscribers are considered "active"), making it Europe`s second-largest ISP behind Deutsche Telekom (DT) `s T-Online. The $2.37 billion merger deal of Wanadoo and Freeserve (FREE) , announced on Wednesday, would create the third-biggest ISP, with 4.2 million subscribers.
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08.12.00 09:58:51
Why the Tiscali-World Online Deal Wasn`t News in Germany

A peculiar legal hitch kept the country`s media in the dark when it came to news of the proposed acquisition.
By Bernhard Warner



LONDON – Late in the afternoon on Thursday, news – big news – broke. Italian ISP Tiscali was acquiring Dutch competitor World Online in a $5.1 billion deal. Newsrooms across Europe were buzzing, except in Germany. Why? A quirky German securities disclosure law actually forced the dealmakers to keep the German media in the dark.


And so, while newsroom fax machines and printers in England, the Netherlands, Italy and France were spitting out an 18-page press release that painstakingly detailed the deal, German fax machines went conspicuously quiet.


"It was just to be on the safe side," says Margaret Van Kampen, whose eponymous PR firm handles the publicity for the World Online. "There was a risk of this document – with this level of detail in it – it could have been construed as a formal offering."


Attorneys for World Online at Allen & Overy in Frankfurt advised Tiscali and World Online that such a document could indeed be deemed misleading by Germany`s securities regulators. And therefore, they advised the principals should not disseminate the news in Germany. Numerous calls to the law firm were not returned. But Regina Noessner, a spokeswoman for Bundesaufsichtsamt für den Wertpapierhandel – the German equivalent to the U.S. Securities and Exchange Commission – said she`d never heard of a rule whereby German reporters were barred from receiving a news release.


Acting on orders from attorneys, Van Kampen and her crew went through their extensive media list Thursday afternoon and purged every German reporter`s name, e-mail and fax number from the distribution list for the Tiscali-World Online press release.


"It was an oddity to me," says Debby Wilson, the head of corporate communications for World Online. She said she`d never heard of such a policy.


At least a dozen firms – five investment banks and five public relations houses in Europe and the U.S. alone – worked on structuring the deal and disseminating the news to the press. The Standard contacted several bankers and attorneys involved in the deal, and none could articulate why the Germans were shut out. A disclaimer at the top of the press release stated that this news "was not for release, publication or distribution, in whole or in part, in or into Germany, Canada, Australia or Japan."


Van Kampen said the ban did not go over well. "I had a livid reporter from a German publication call me this morning," she said. "He said he didn`t get the release."


Other German reporters had to be more resourceful. Holger Schmidt, economics editor for Frankfurter Allegmaine Zeitung, a daily newspaper in Frankfurt with more than 400,000 readers, pieced together a story from a correspondent based in Rome and from wire reports. He thought it was curious that he didn`t get an official press release sent to him Thursday evening, but he didn`t fret because he was able to get details from other sources.


When told that reporters in every European country but Germany received the news via an elaborate system, he responded in an astonished voice, "I didn`t see anything like that!"
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08.12.00 10:08:42
October 10, 2000, 9:22 AM PDT

Europe`s Biggest ISP Merger to Be Refinanced?

As Tiscali`s share price slumps, World Online`s harried investors are likely to lose out.
By Bernhard Warner








France Telecom (FTE)
Freeserve plc (FREE)
Liberty Surf Group Sa (LBY)


LONDON – Will Tiscali`s proposed buyout of World Online, Europe`s biggest Internet merger deal, have to be re-priced? Tiscali, the Sardinia-based Internet service provider, announced last month that it would purchase the larger World Online for 5.9 billion euros ($5.12 billion) in an all-stock deal. But the company`s steadily declining stock price could mean the deal will need to be refinanced.


The merger was contingent upon Tiscali`s share price staying above 40.90 euros. If the stock maintained this threshold, Tiscali would pay 20 euros for each World Online share. The company`s stock price, though, has been steadily declining since the deal was announced on Sept. 7.


On Monday, trading in Tiscali shares was halted in Milan for a few hours. When dealing resumed, the company`s stock had sunk 14 percent, to 28.90 euros. It rebounded Tuesday morning to above 30 euros, but it`s still well below the minimum level needed to complete the deal as originally agreed.


Unless the stock turns around, the terms of the buyout dictate that Tiscali will pay 15 euros for every share of World Online, a 25 percent loss for World Online investors. "It`s entirely possible that they might have to re-price it because there are World Online institutional investors who will want more for their World Online shares," says Simon Edelsten, an analyst with Dresdner Kleinwort Benson.


The biggest investor in World Online is the Sandoz Foundation, which owns 44 percent of the Dutch ISP`s shares. The Sandoz Foundation has been quiet since the deal was announced. According to World Online and Tiscali, Sandoz has entered into an irrevocable agreement to accept the offer.


Tiscali`s chairman Renato Soru said in an interview last month that there was no chance the deal would be torpedoed by the falling Tiscali share price. He was unavailable for comment yesterday.


The entire European ISP market is slumping. At the root of the decline is serious skepticism about the huge costs of expanding across the continent. Stock of the largest ISP in Europe, Germany`s T-Online, has staggered to an all-time low of 22 euros. Similarly, on Monday, stocks in Britain`s Freeserve (FREE) were down by 5 percent; World Online declined 9.9 percent to 11 euros; and Wanadoo, the France Telecom (FTE) spinoff, closed at an all-time low of 14.10 euros.


Tiscali shares also took a beating Monday on the news the company was in negotiation to buy the French ISP Free. What`s worrying analysts and investors is that ISP revenues are not rising in proportion with costs, a trend that is leading to the frightening notion that many of these firms are losing money on each customer. Adding fuel to the fire are continued reports that the biggest ISPs, including France`s Wanadoo and Tiscali, are in talks to buy smaller rivals. Wanadoo has repeatedly been linked to the German ISP Freenet, while Tiscali has been in on-again-off-again talks to buy French rival Liberty (LBY) Surf.


The Tiscali-World Online merger deal is still on track to be finalized next month. But the biggest hurdle remains: The shareholder meetings for both companies will be held in the coming weeks. So far, investors have remained loyal to Tiscali, a company that has benefited from the nationalistic pride of Italian speculators. World Online shareholders, who have already weathered a poor IPO and an insider-trading scandal, may not be so patient.


"The Tiscali shareholder fan club is very Italian," Edelsten said. "And the disgruntled World Online shareholders aren`t a fan club at all."


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Tiscali Clinches Cut-Rate Deal for World Online