AOL targets online growth

Associated Press Published:

The Washington Post quoted sources close to the negotiations as saying the Columbus, Ohio-based CompuServe, with 2.6 million customers, would still exist as a separate service but would be fully operated by AOL, which now has 9 million subscribers. Announcement of the agreement was expected today, according to the report.

"AOL is going to use its scale and its resources to make (CompuServe) more focused and efficient in servicing the business and professional market," the newspaper quoted one unidentified source as saying.

It said AOL would acquire CompuServe in a complex transaction involving WorldCom Inc. Under the deal, the Post said, WorldCom would buy CompuServe for $1.2 billion, then give AOL all the content and subscribers and $175 million in exchange for AOL's ANS network service, which supplies about one-third of the network capacity for AOL's own customers.

WorldCom owns UUNet Technologies Inc., one of the largest Internet service providers. The Post quoted a source as saying that WorldCom would agree to provide network services to AOL for five years at "very competitive" rates.

The deal would have to be approved by government antitrust regulators. If approved, AOL's biggest competitor would be Microsoft Corp.'s Microsoft Network.

The Post said an AOL spokesman refused to comment on the matter Sunday night and that executives at CompuServe and WorldCom did not immediately return telephone calls.

But CompuServe has been on the market for roughly a year by H&R Block Inc., which owns 80 percent of the online service stock, and a CompuServe spokesman told the Post on Saturday that the company was "in active talks" to sell itself.

A plan to make CompuServe a separate stock company owned by H&R Block shareholders, a realignment planned for late last year, was withdrawn after Internet stocks in general declined.

The Post said WorldCom's $1.2 billion offer for CompuServe amounts to about $13 a share. CompuServe stock closed Friday at $13.50 per share.

The Wall Street Journal reported in July that German media giant Bertelsmann AG, which owns 5 percent of AOL, was contributing cash so AOL could sweeten an offer pending at that time of roughly $1 billion for CompuServe.

The Post story said Bertelsmann and AOL would jointly operate CompuServe's European service.

CompuServe pioneered the online business in the 1980s, but it was

overtaken by America Online in the 1990s.

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