Sydney, October 6^th (Bloomberg)

-- LibertyOne Ltd., an Australian Internet media company, has confirmed it's in merger talks with an unnamed firm. Hong Kong-based China.com Corp., which operates web sites in the region, is the most likely partner, analysts said.

"The company is having discussions which may lead to a merger,'' Sydney-based LibertyOne said in a response to questions from the Australian Stock Exchange following the company's recent share price gains. ``However, the discussions are confidential and at this stage quite incomplete.'' LibertyOne and China.com both declined to comment further.

LibertyOne's shares have soared 81 percent in the past month on talk that China.com will seek to merge with the Australian company, which has the exclusive right to develop web sites for U.S.-based At Home Excite Corp. throughout the Asia-Pacific region. Still, only the Australian Excite web site has been launched so far, even though LibertyOne has rights to develop 11 Excite sites in Asia.

"They are desperate to do something because even though LibertyOne has some options on the Excite properties in the region, exploiting this has turned out to be a major challenge for them,'' said Ramin Marzbani, who runs Australia's largest research firm www.consult.com.au

Last month, the world's No. 1 Internet service provider America Online Inc. teamed up with China.com Corp. to start an Internet service in Hong Kong, strengthening its China foothold.


U.S Stock Offer

LibertyOne is also seeking to raise up to A$70 million (US$46 million) in a U.S. stock sale and apply for a listing on the Nasdaq market. That's aimed at expanding its web design and content business. China.com's U.S. initial share sale was managed by U.S. investment bank Lehman Brothers, which is also advising LibertyOne on its potential Nasdaq stock offer.

Shares of China.com., which operates bilingual Web sites focused on China, Taiwan and Hong Kong, more than tripled on its U.S. stock debut in July after raising $84 million. A merger with LibertyOne would form a single web design, online access and content business in the region.

"China.com has abundant local expertise and LibertyOne has the strong Excite online brand name,'' said an APT Strategies spokesman. ``As the Asian Internet market grows in the next two to three years, proven online brands will be crucial for profits.'' China.com already offers Internet access to seven Asian countries.

The number of Internet users in Asia outside of Japan is expected to expand at 35 percent a year until 2003 to reach 57.5 million customers, market researcher International Data Corp. IDC estimates that the Internet commerce market in Asia excluding Japan will climb to $32.6 billion by 2003 from $724 million last year.

American Invasion

That's sparked U.S. companies such as the No. 1 Internet search engine Yahoo! Inc. to offer more products to hook consumers, such as a new online auction service in Singapore and Japan, announced last month. Lycos Inc., the No. 3 online directory, formed a $50 million venture with Singapore Telecommunications Ltd. to set up 10 Internet sites tailored for Asian markets. Yahoo! and Lycos may get the jump on LibertyOne and Excite, which is targeting Singapore, Malaysia and New Zealand for the roll-out of more web sites.

In September, Liberty bought three stakes in Hong Kong-Internet web businesses in less than a week. The company acquired 25 percent of closely held Chinese Books Cyberstore Ltd. for an undisclosed sum and it bought an 8 percent stake in HT Hypernet Ltd., an e-commerce company specializing in property. Liberty will become major shareholder in six months in HT Hypernet with an option to move to 51 percent. Also last month, LibertyOne bought a 75 percent stake in closely held Net Power Ltd., which provides web designing services and Internet consulting.

LibertyOne raised A$40 million in December, selling 26 percent of stock in a public share sale. Its shares closed 10 cents lower to A$1.83, while China.com fell 1 11/16 to 63 1/16 in the U.S. on Tuesday.

--Duncan Craig in the Sydney newsroom (612) 9777-8601