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Financing Scuttles Answers.com's Bid for Lexico


Answers.com, whose stock in trade is finding solutions to pressing questions, could not find one for itself when it came to financing its planned $100 million acquisition of Lexico Publishing Group, the parent of Dictionary.com.

On Wednesday, New York City-based Answers.com called off its proposed $85 million stock offering, effectively ending its pursuit of Lexico. The buyout agreement signed in July by Lexico, based in Long Beach, California, expires March 1.

"It would seem the deal is all but over," said Matthew Weiss, an analyst at the Maxim Group. "It could still get done if an investment group comes in, but I don't see that as a likely scenario."


On the news, shares of Answers.com climbed $.62, or 12.6 percent, to $5.54. Mr. Weiss, whose firm makes a market in Answers stock and was an underwriter on the stock offering along with Thomas Weisel Partners, Canaccord Adams, Stifel Nicolaus, and ThinkEquity Partners, said some investors had balked at the deal's integration risk and what they considered a lofty price tag for Lexico.

"The risks are out of the way," he said. "That's why the stock is getting a little lift."

Answers.com founder and Chief Executive Robert Rosenschein declined to comment directly on the Lexico deal, saying only that "we'll be strong with them and strong without them."

In 2007, Answers.com's sites had the 16th fastest percentage growth in unique visitors, according to comScore Media Metrix. Unique visitors to the company's community site, WikiAnswers, grew 573 percent, to nearly 6.5 mmillion in 2007, making it the fastest growing domain of the top 1,500, according to comScore.

Answers.com management had pushed forward with the acquisition in part to wean itself from reliance on traffic from Google. In August, Answers.com's stock fell after revealing that a change in Google's search algorithms had cut traffic to Answers.com's sites.

Google and other search engines accounted for 65 percent of Answers.com traffic in the fourth quarter of 2007, according to the company. By contrast, Lexico, whose sites also include Thesaurus.com and Reference.com, got only an estimated 12 percent of its traffic through search engines, making it less susceptible to disruption.

For the quarter ended September 30, Lexico posted net income of $607,294 on revenue of $2.1 million. Answers.com, meanwhile, recorded a net loss of $2 million on revenue of $2.2 million.

Mr. Rosenschein said that no breakup fee would be paid to Lexico in the event the deal does not go through, but that $500,000 would be paid to defray accounting costs.