Yahoo closes GeoCities merger

Portal leader Yahoo has completed its $US4 billion acquisition of community site GeoCities, absorbing more than 4 million Web homesteaders but jettisoning about two-thirds of the GeoCities staff.

Yahoo is issuing 21.545 million shares in the all-stock transaction and will also convert 8.6 million GeoCities stock options into 5.82 million Yahoo options, pushing the total value of the deal to just over $US4 billion at today's market close. The company will also take a one-time $US68 million charge in the second quarter for expenses related to the acquisition.

GeoCities stockholders should make out well, even amid fears of the end of the Internet stock bubble. When the acquisition was announced in late January, Yahoo promised to swap 10.613 million shares at a value of $US183.875 a share, or $US1.95 billion. Soon after, Yahoo split its own stock, doubling the number of shares in the purchase. Even with a recent downturn in the market, those Yahoo shares are worth $US3.19 billion. Throw in the options, and the total climbs to $US4 billion. At least for now.

Who will cash in remains a question. Of GeoCities' 319 employees, only about 100 will keep their jobs, Yahoo said. The layoffs will affect several divisions, but GeoCities' staff in engineering, customer service and community production are more likely to stay, a Yahoo spokeswoman said. She refused to comment on reports of generous severance packages.

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