Net2Phone Rockets on News of AOL Interest in Buying Controlling Stake

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Shares of

Net2Phone

(NTOP)

spiked in the last 30 minutes of trading Monday, after

CNBC

reported that

America Online

(AOL)

was in talks to acquire a controlling stake in the Internet telephone-service provider for as much as $1.75 billion.

Citing unidentified sources that it said were close to the talks,

CNBC

said a deal could be announced this week with

IDT

(IDTC)

, an Internet-based telephone company that owns 25 million Net2Phone shares, or about a 48% stake in the company.

The financial-news cable channel said that the exact price AOL could pay for Net2Phone was not known, but that $70 per share would not be unreasonable.

If a deal was reached, AOL would own 58% of Net2Phone.

Neither AOL nor Net2Phone would comment on the

CNBC

report. IDT executives could not be reached for comment.

Within minutes, Net2Phone's stock soared more than 23 from its daytime low of 45, hitting a high of 68 3/4. The stock closed with a total one-day gain of 12 3/16, or 25%, at 60 3/4, and showed little change in after-hours trading.

IDT's stock also climbed, gaining 6 3/8, or 22%, to 29 1/2, but later retreated to 28 5/8 in after-hours trading, according to

Instinet

.

AOL's shares ended down 1 1/4, or 2%, at 55 3/4.

Net2Phone's service, commonly referred to as Internet telephony, allows customers to call individuals and businesses worldwide using their personal computers or conventional telephones.

Cynthia Houlton, an analyst at

Dain Rauscher Wessels

, noted 70 a share was below Net2Phone's all-time high. "It's certainly not a premium to what the stock has traded at," she said.

Net2Phone has traded as high as 92 last August. Houlton's price target had been 50. She rates Net2Phone a buy and her firm has not done any underwriting for the company.

"I think AOL has shown that they'll move pretty aggressively to make acquisitions in technology, and value added," Houlton said. "This would not be the most shocking combination because they already have an exclusive agreement with AOL."