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CUC Spends $2.2 Billion to Buy Two Software Makers

February 20, 1996

STAMFORD, Conn. (AP) _ CUC International Inc., a membership-based home shopping service, announced today it is buying two software makers in deals worth $2.2 billion.

CUC said it would pay about $1.14 billion for Davidson & Associates Inc., a Torrance, Calif.-based publisher of educational software. The company also said it would buy Sierra On-Line Inc. of Bellevue, Wash., for about $1.06 billion. Sierra produces PC games such as Phantasmagoria and the King’s Quest series.

The announcement had rocked the stocks of all three companies by midday.

CUC shares fell $5 to $32,50, a 13 percent drop on the New York Stock Exchange. Prices of the other companies rose sharply. Davidson shares were up $7.75 to $26.50, a 42 percent jump, while Sierra shares rose $10.12 1/2 to $37.25, a 37 percent jump, both on Nasdaq.

The deals are the largest technology-related purchases by CUC, which until recent months had concentrated on a telephone-oriented home shopping service.

It sells merchandise, travel packages and services at a discount to consumers who buy memberships, similar to a discount warehouse store such as Sam’s Wholesale Club. They typically place orders over the telephone, although CUC last fall started a shopping service on the Internet.

CUC also said it has completed its purchase of Rent Net, which lists apartment rentals on the Internet. It bought NetMarket, a consultant and developer of Internet sites, in November.

CUC, founded as Comp-U-Card of America in 1973, primarily sells memberships in discount services to consumers.

The company is betting that personal computers and interactive technology will provide the main growth for how consumers get information and spend money.

The purchases are part of its attempt to build an electronic marketplace combining education, entertainment, discount offerings and the ability to spend money, said Walter A. Forbes, chairman and chief executive of CUC.

``CUC brings potentially 40 million new consumers into the interactive marketplace. We’re looking forward to growing this business with CUC and reaching every one of those new customers,″ said Sierra chief executive Ken Williams.

The valuations of the deals are based on the $37.50 closing price of CUC common stock on Friday.

Under the terms of the agreements, CUC plans to issue 0.85 share of its common stock for each share of Davidson common stock, and 1.225 shares of CUC stock for each share of Sierra On-Line stock.

Davidson has approximately 36 million shares of common stock outstanding and Sierra On-Line has approximately 20 million shares.

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