AOL Reported Making a Play for CompuServe

  • Share
  • Read Later
NEW YORK CITY: As rumors circulated that AOL may acquire smaller rival CompuServe, CIS stock rose for the third straight day and parent H&R Block confirmed that it is engaged in talks to sell the company, though it would not confirm that AOL is the leading bidder. AOL closed down $0.87 at $44.875, while Columbus-based CompuServe ended the day up $1.50 at $12.50. CompuServe's stock has risen nearly 24 percent since rumors of a takeover surfaced. For AOL, the purchase would eliminate the company's main competitor, boost its subscriber base by CompuServe's 2.9 million members and give the Virginia company extensive membership in foreign markets where CompuServe is strong. Most important, the deal would give AOL CompuServe's strong network capacity at a time when the company is struggling to bring enough modems online to meet customer demand. Even after its recent rise, CompuServe would come cheap, with stock trading well below its 52-week high of $35.50. AOL would have to scramble to raise cash for a deal. The company, which had only $111 million in cash on hand as of Dec. 31, isn't expected to have a positive cash flow for several months. Because of this, any deal would probably be executed with a stock swap.