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Friday, May 1, 1998 - Page updated at 12:00 AM

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Disney Completes Buyout Of Starwave

Seattle Times Business Reporter

After a yearlong engagement, Disney has completed its buyout of Starwave, the Eastside Internet publishing company founded by Paul Allen.

As part of yesterday's deal, Disney purchased all remaining Starwave shares owned by billionaire Allen, the co-founder of Microsoft.

Details of the transaction were not publicly disclosed. Many of Starwave's 300 employees, who were to learn details of the deal later today, were left wondering what the sale means for them.

Starwave publishes some of the Internet's most-popular destinations, including ESPN's online sports site.

Until last year, the company had long been expected to go public, joining the ranks of technology companies that have turned top executives and rank-and-file employees into millionaires as their stock shoots up in value.

Now, though, the worry around Starwave is that employees could get only the equivalent of $10 to $13 worth of Disney stock for each option of Starwave stock they hold.

By contrast, another Internet sports company, Sportsline, has seen its shares jump from $7.75 to more than $35 since it went public last spring.

"Now people are really antsy," said one Starwave employee, who asked not to be identified. "People are saying they missed it big, they missed it really big."

In the meantime, the executive overseeing Buena Vista Internet Group, the Disney division that includes Starwave, promised employees would be happy.

"This is a good deal for everybody," said Jake Winebaum, Buena Vista's chairman.

"As we've been able to, on a limited basis, disclose this deal to employees, they're really excited."

Disney and Starwave have been working together since last April, when Disney purchased one-third of the privately held company. It held the option to complete the purchase by 2002.

Winebaum would not disclose how much Disney paid to acquire Starwave. Analysts estimated Disney paid roughly $100 million for the one-third share.

At the same time as the investment last spring, Disney announced that Starwave had joined in joint ventures with two Disney properties: ESPN, the all-sports channel, and ABC News.

Winebaum said yesterday that the performance of those projects was one reason Disney paid for the rest of Starwave so soon.

Buena Vista Internet Group will continue to produce other Starwave Internet sites, including Mr. Showbiz, CelebSite and official Web sites for the National Football League, National Basketball Association and Outside magazine.

Though the Starwave name will disappear, employees will remain in the company's Eastside offices.

Mike Slade, Starwave chief executive, is now president of Buena Vista Internet Group. Starwave President Patrick Naughton is now chief technical officer of Buena Vista. Naughton discounted speculation that some employees, figuring Starwave has run its course, may leave for another Internet adventure.

After all, the information published on ESPN's online site is viewed by more people than almost any other content on the Internet.

"One of the things that will keep people and attract people to work with us," Naughton said, " is the opportunity to touch millions of eyeballs, not thousands."

Thomas W. Haines' phone message number is 206-464-2537. His e-mail address is: thaines@seattletimes.com

Copyright (c) 1998 Seattle Times Company, All Rights Reserved.

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