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Doug Nairne

Lycos Asia is nearing completion of a deal that will see it consume Chinese-language portal MyRice.com and gain a key foothold in China's Internet market.

Sources say Lycos will pay about US$13 million to acquire its competitor.

The combined traffic of the new partnership would make the Lycos family of sites the 12th most-visited property in the mainland, drawing about 20 per cent of all users.

An official from Lycos Asia refused to comment on the deal, but did indicate that there would be several announcements during the coming weeks.

'We are talking to a number of companies right now and we are always looking for partnerships and alliances in Greater China,' the official said.

'There are some significant opportunities out there right now. A lot of dotcom companies are running out of funds and so the market is opening up.'

Antony Yip, the 22-year-old co-founder and co-chief executive of MyRice.com, said he could not discuss the rumours which have swirled around his company's future.

Previously, Mr Yip had said that with the turmoil in the dotcom sector, he had been waiting for suitors to approach him about a deal.

In October, reports from the mainland indicated Hong Kong broadband content provider I-Cable was interested.

MyRice.com was founded in 1999 by Mr Yip and former ABN Amro investment banker Howard Chu.

The portal is a collection of more than 30 Chinese-language sites which span topics from sports to films, games, romance, humour, technology and stocks.

Mr Yip is the son of Peter Yip, head of chinadotcom.

MyRice.com secured US$7.75 million in two rounds of fund-raising, the most recent of which was in January last year.

Its investors include Sun Hung Kai's Kwok brothers, W I Harper and Odyssey Venture Partners.

Prior to the dotcom bubble bursting, there had been plans to seek a flotation on Nasdaq or Hong Kong's Growth Enterprise Market to raise about US$100 million.

Steve Yap, communications director for research firm Interactive Audience Asia (iamasia), said the popular MyRice.com property would give Lycos a key foothold in a market where it was previously not a significant force.

'It would have been hard for Lycos to try to build up from scratch in a market where there already are some well-established players,' he said.

Based on iamasia's November data, a total of 1.2 million home Internet users visited a site operated by MyRice.com at least once during that month. By comparison, only about 300,000 visited a Lycos site.

Mr Yap predicted further consolidation in the Internet market as large players with money to spend seek to acquire smaller sites.

'There are some bargain-priced companies out there,' he said. 'The trend will be for those who still have money left to try to buy their way to success.'

There has been speculation that other dominant players, such as Yahoo!, are looking for acquisition targets among the larger mainland portals to strengthen their Greater China presence.

Yahoo! recently bought Kimo, one of Taiwan's largest portals, in a US$146 million share-swap deal.

Grabbing MyRice.com will not come cheaply for Lycos if the deal goes through as expected. At the price being discussed, it would cost about US$10 for each new home user.

Lycos Asia is a joint venture between Lycos and Singapore Telecommunications. Last May, the company launched its Greater China sites located on the mainland, in Hong Kong and Taiwan.

In the past, company officials have talked of their desire to expand their presence in the Chinese-language market.

The Lycos Asia Network of sites includes Lycos.com, Tripod and MailCity.

Although it has been a relatively insignificant force in Asia, Lycos is a powerhouse on the global stage. The company is listed on Nasdaq and has a market capitalisation of more than US$7 billion. It is one of the most-visited hubs on the Internet and, according to the company, reaches nearly 50 per cent of United States Web users.



US$13m MyRice.com deal would see traffic rise to 20 per cent of all China Net users visiting family of sites