NLR, Internet2 merger off again

Internet2's on-again, off-again relationship with National LambdaRail has hit another rough patch.

This week, NLR board chair Erv Blythe announced that the NLR board of directors had voted down a motion to approve a proposed merger with Internet2 for the second time this year and that the company had terminated merger discussions with Internet2.

Blythe said that the "unique nature" of NLR's bylaws was a major factor in the NLR board's decision to nix the merger. The bylaws state that if NLR merges with another company, then members must receive payments of consideration directly proportional to their aggregate contributions to NLR. In other words, NLR members would be entitled to a portion of any assets that were liquidated during the merger. Most 501(c)(3) organizations, by contrast, do not give their members the rights to any assets left over after a merger or acquisition.

"Even though NLR's bylaws permit the board of NLR to cause a merger with another entity, the provisions in NLR's bylaws pertaining to the contributions of NLR's members had to be considered when evaluation a merger," Blythe said. "For instance, NLR was informed by counsel for at least one NLR member that . . . the member would need to obtain adequate consideration for their contributions if NLR merged with another entity. Otherwise, the merger could be considered a gift in violation of state law."

Jeffery Lehman, the chair of Internet2's board of trustees, said that he regretted that the two nonprofit research networks would not merge and that Internet2 had "no choice but to move forward independently." He also thanked members of the NLR community who had tried to get the merger approved.

A merger between NLR and Internet2 was first proposed in July 2005. After experiencing numerous false starts, the merger talks looked like they'd gotten back on track at the beginning of this year, after NLR Chair Tracy Futhey called Lehman and asked whether he "wanted to take a fresh look at the idea of a merger." A merger between the two research network providers would make sense, the organizations' officials said at the time, because both of them offered similar Layer 1, 2 and 3 services to researchers.

The proposed marriage again stalled, however, when NLR's directors voted down a proposed merger plan this past August. The two organizations continued negotiating after the first merger plan fell through before calling the talks off this week.

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