H&R Block, CompuServe's majority shareholder, last week confirmed the troubled on-line service is up for sale following speculation that America Online was seeking to buy it.
The rumours began when analyst Charles Payne of Wall Street Strategies, an investment firm in New York, wrote in a research note that he had heard America Online was making "a play for Compu-Serve".
Payne wrote: "We like the story. CompuServe's stock is depressed and the company's subscriber list is certainly worth more than $9 (#5.60) a share. By the way, the last seven insider transactions have been buys."
Neither company would comment on the rumours until last Wednesday evening, when H&R Block confirmed it was in merger discussions concerning CompuServe.
The company, which owns 80% of CompuServe, said in a press statement: "H&R Block is currently engaged in external discussions regarding a possible business combination involving CompuServe. There are no assurances that such discussions will result in any agreement or transaction."
Analysts believe an acquisition would be a positive step, pointing out that CompuServe's vast Internet backbone would benefit America Online.
But Ben Knox, managing director of Direct Connection, a UK-based ISP, doubted any merger or acquisition between the two companies would go smoothly.
"The two companies use completely different proprietary technologies.
I think any unison between them would be rocky to say the least. They also have very different approaches to running their businesses."
- Net.news, page 16.
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