AOL Agrees to Buy MapQuest in ‘Takeunder’ Acquisition
What are highflying Internet stocks really worth? Less than some short-term traders may think, a takeover plan by America Online suggests.
The leading online service on Wednesday agreed to buy MapQuest.com Inc., the No. 1 provider of maps on the Internet, for about $1.1 billion in AOL stock.
The problem for some MapQuest shareholders: The deal values MapQuest at $26.11 a share, based on AOL’s closing share price on Wednesday. That’s 20% below MapQuest’s stock price on Tuesday.
The deal terms sent MapQuest shares plunging $7.06 to close at $25.44 Wednesday on Nasdaq. AOL fell $2.25 to close at $82.75 on the New York Stock Exchange.
MapQuest stock had run up from $28 on Monday to $32.50 on Tuesday, perhaps in anticipation of an offer. But even at Monday’s price of $28, the terms of AOL’s offer--0.31558 of an AOL share for each MapQuest share--provide no premium to MapQuest’s market price.
Such “takeunders,” as they’re known on Wall Street, are fairly rare. Normally an acquiring company offers some kind of premium over the target’s market price.
That has been true even in the cases of many already highly valued Internet issues.
On Monday, for example, Conexant Systems offered $1 billion in stock for tiny networking technology firm Maker Communications. The offer valued Maker’s shares at $45.96 each, a 34% premium over their closing price on Friday.
Although AOL isn’t paying a premium for MapQuest versus its recent market price, the deal still will presumably reward MapQuest insiders who got their shares at much lower prices. The Mountville, Pa.-based firm went public in May at $15 a share.
AOL plans to provide MapQuest’s service to its 20 million online subscribers, giving them access to instant electronic maps and directions to restaurants, stores and other locations.
But AOL also wants to develop services for users of portable Web gadgets such as “smart” cellular phones, electronic organizers and other emerging alternatives to the desktop computer.
Zapping maps and other services, such as e-mail and movie information, to those hand-held devices is key to AOL’s hopes to sustain its blistering online growth, which today is highly dependent on demand for personal computers, the main way people access the Internet.
While demand for PCs is slowing, the market for hand-held devices is expected to more than triple to 18.9 million units in 2003 from 5.4 million units this year, according to the research firm International Data Corp.
“AOL’s been very vocal about their intention to move off the PC and onto wireless devices. Mapping is one of the keys to that,” said Aram Sinnreich, an analyst with Jupiter Communications Inc.
MapQuest.com is by far the most popular supplier of maps on the Net. Its 3.7 million visitors last month made it the 49th most-visited Web site, according to Media Metrix. MapQuest.com offers its service in five languages and covers 78 countries.
Visitors to the MapQuest.com site type in destinations and then see maps and directions to help them get there. In addition to targeting consumers, MapQuest.com licenses its technology to more than 950 businesses.
Providing maps to businesses provided the bulk of MapQuest’s $23 million in revenue in the first nine months of 1999.
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Bad Guess
Investors who bid up MapQuest shares Tuesday on takeover speculation were stunned Wednesday when America Online offered much less than expected. Daily closes and latest for MapQuest on Nasdaq:Wednesday:
$25.44, down $7.06
