SAN FRANCISCO (03/23/2000) - Multinational Internet service provider PSINet said today that it would use $1.9 billion in stock to acquire Metamor Worldwide, a technology and electronic-commerce consulting firm. PSINet hopes the acquired company would support PSINet's existing clients and refer new ones for the services it already provides.
PSINet says it would acquire Metamor for $45 a share, a premium of 190 percent over the firm's closing price yesterday. The acquisition would include control of Metamor's subsidiary, e-commerce consultancy Xpedior. Between them, Metamor and Xpedior employ 4,500 people, who can work with PSINet clients as well as with other companies that can be referred back to PSINet for business.
Herndon, Va.-based PSINet provides Internet services to businesses and governments in 27 countries. In 1999, the company acquired ISPs in Argentina, Australia, Brazil, Hungary, Mexico, Panama and Spain. It also picked up Transaction Network Services, an operator of data networks for credit card transactions, for $720 million.
CEO William Schrader says the Metamor acquisition is a logical continuation of the company's move into e-commerce services. "PSINet had the fiber and the Web-hosting environments already in place, and we needed the technical talent to help the customers migrate to the electronic commerce world," Schrader says.
"Our customers are demanding that we not outsource this activity to other players, but that we have it under one roof."
Schrader says the deal would instantly increase the amount of revenues and profits generated per client for PSINet, Metamor and Xpedior. PSINet plans to invest $50 million in Xpedior by issuing newly convertible bonds. The acquirer will offer 0.9 shares of PSINet common stock for each share of Metamor stock.
PSINet shares fell $8.19, or 16.5 percent, to $41.38 on news of today's announcement. Shares of the acquisition candidates rose in early trading today:
Houston-based Metamor rose $17.13, or 107 percent, to $33.13, and shares of Chicago-based Xpedior rose $6.69, or 46.7 percent, to $21. All quotes are as of 1 p.m. EST today.
Metamor provides software implementation and integration services, as well as hosting and network services, to Fortune 1000 companies. Xpedior's clients are primarily Fortune 2000 companies. PSINet expects the transaction to close by the middle of 2000, the company said.