Slide 1: Terra Lycos Minorities Buy-Out
TERRA LYCOS MINORITIES BUY-OUT Madrid May 28, 2003
Slide 2: Disclaimer
DISCLAIMER This presentation contains statements that constitute forward looking statements in its general meaning and within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this document and include statements regarding the inten
Slide 3: Index
INDEX 9 Transaction Overview 9 Transaction rationale 9 Terra Lycos holders: attractive premium over business market valuation 9 Telefónica holders: ÖStrategic restructuring and integration ÖFinancial impact on Group accounts and value 9 Conclusions
Slide 4: Transaction Overview: Key Transaction Terms
TRANSACTION OVERVIEW: KEY TRANSACTION TERMS 9Cash tender offer under applicable Regulations Consideration 9Up 100% of minorities (62.05% of outstanding share capital) 9For each Terra Lycos share: 5.25 € Price Aggregate 9Premium over: value Equity value (ex-cash) (1) Last closing price (2) 51.2% 16.2
Slide 5: Transaction Rationale
TRANSACTION RATIONALE INTERNET BUSINESS MODELS HAVE EXPERIENCED DEEP CHANGES SINCE 9Telefónica has consistently adapted to business TERRA LYCOS IPO, CHALLENGING model changes, supporting its Internet offering THE EXISTENCE OF INDEPENDENT COMPANIES 9The new Internet Model demands integration INTERNET
Slide 6: The Internet business model has undergone a deep transformation
THE INTERNET BUSINESS MODEL HAS UNDERGONE A DEEP TRANSFORMATION... FROM INTERNET BOOM... ...TO CURRENT ENVIRONMENT 9 Sustainable / Independent business models 9 Consolidation of “big players” 9 Easy access to capital markets financing 9 Financing concerns and reduced funding options 9 Strong on-line
Slide 7: We have supported Terra Lycos to build a solid independent Internet business
...AND WE HAVE SUPPORTED TERRA LYCOS TO BUILD A SOLID INDEPENDENT INTERNET BUSINESS, ADAPTING TO SECTOR CHANGES... 9 Integration of all Spanish and Latin-American ISP and portal subsidiaries into Terra before IPO 9 Nov. 1999: Terra IPO (853 Million € cash inflow to Terra) 9 Sep. 2000: Capital increa
Slide 8: Market has continuously revised downwards the chances of Terra Lycos' business model
...ALTHOUGH THE MARKET HAS CONTINOUSLY REVISED DOWNWARDS THE CHANCES OF TERRA LYCOS’ BUSINESS MODEL TO SUCCEED 12 months ago * 6 months ago * 23/05/03 * Buy 4% Hold 3% 17% Sell 140 43% 40% 50% 105 46% 57% 70 40% Target Target Target 35 €8.4 €5.5 €5.1 0 11/99 01/00 03/00 05/00 07/00 09/00 11/00 01/01
Slide 9: Integration is a must to capture the broadband opportunity
INTEGRATION IS A MUST TO FULLY CAPTURE THE BROADBAND OPPORTUNITY, KEY FOR INTERNET AND WIRELINE... Telecom VAS and Portal Companies Providers Closer integration 9 SBC-Yahoo! Alliance between 9 T-Online and Wanadoo Back-office, Telecoms, ISPs and VAS 9 MSN-Verizon Alliance connectivity and customer a
Slide 10: Especially relevant for the future of Telefónica
...AND ESPECIALLY RELEVANT FOR THE FUTURE OF TELEFONICA, HAVING INCUMBENT OPERATIONS IN SPAIN & LATAM 9 Internet and IP are driving the transformation of fixed telecom businesses 9 Internet is the answer to client´s demand for integrated products and services (connectivity + Internet access + Value
Slide 11: Terra Lycos assets complementary to Telefónica's Internet skills
...WITH TERRA LYCOS ASSETS BEING COMPLEMENTARY TO TELEFONICA´S GROUP INTERNET SKILLS 9 A strong brand recognition among Internet users 9 A presence in the countries where Telefónica has a robust wireline footprint 9 Solid capabilities as Communication Service Provider 9 Capacity for on-line content,
Slide 12: Terra Lycos' holders: attractive premium over business valuation
TERRA LYCOS’ HOLDERS: ATTRACTIVE PREMIUM OVER BUSINESS VALUATION Business +16.2% 5.25 € valuation 4.52 € Cash 2.16 1.43 +51.2% 3.09 3.09 AN ATTRACTIVE PREMIUM, HIGHER THAN ANY UPSIDE Price as of 27/05/03 Offer price THAT TERRA LYCOS AS AN INDEPENDENT BUSINESS Aggregate COULD CAPTURE value Equity val
Slide 13: Telefónica holders: strategic restructuring and integration
TELEFONICA HOLDERS: STRATEGIC RESTRUCTURING AND INTEGRATION TERRA IS TRANSFORMED INTO A BUSINESS LINE INTEGRATED IN TELEFONICA GROUP 1.- Terra will be an identified business line, within Telefónica Group: 9 Developing the Brand potential for the residential and Soho segments. 9 Improving and sharing
Slide 14: Telefónica holders: strategic restructuring and integration
TELEFONICA HOLDERS: STRATEGIC RESTRUCTURING AND INTEGRATION 4.-Terra will manage Lycos US as an independent business, as the US is not one of Telefónica´s wireline natural markets: 9 Using and transferring to the rest of Terra best US practices. 9 Continuously adapting and resizing to US internet ma
Slide 15: Telefónica holders: transaction synergies
TELEFONICA HOLDERS: TRANSACTION SINERGIES SYNERGIES IN COSTS & CAPEX SYNERGIES IN REVENUES THROUGH THROUGH BUSINESS RESTRUCTURING BUSINESS REPOSITIONING AND ELIMINATION OF OVERLAPS 9Lead market growth, leveraging on broadband 9Rationalize Corporate Centers, and achieving savings in personnel expense
Slide 16: Telefónica holders: financial impact in Telefónica's value
TELEFONICA HOLDERS: FINANCIAL IMPACT IN TELEFONICA´S VALUE € in Millions ?? ?? 47,384 1.773 490 47,364 200 1.063 TEF Equity Cost of Proportionate NPV savings 61% of Value Adj.TEF Additional TEF Value post Value 05/27/03 Buy-Out * Terra Cash from restructuring of business Equity Value business transa
Slide 17: Conclusions
CONCLUSIONS 9ASSETS RESTRUCTURING AND BUSINESS INTEGRATION WITH WIRELINE OPERATIONS IS THE BEST OPTION TO CREATE VALUE FOR BOTH TERRA LYCOS AND TELEFONICA SHAREHOLDERS: Ö TERRA LYCOS MINORITIES BUY-OUT OFFERS AN ATTRACTIVE PREMIUM TO TERRA LYCOS SHAREHOLDERS, HIGHER THAN ANY PREMIUM THE COMPANY AS A
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