TOKYO (07/03/2000) - The U.S. Government is to probe the proposed acquisition by Japan's NTT Communications Corp. of U.S. Internet hosting and service provider Verio Inc. under legislation usually implemented because of national security concerns, NTT said Monday.
"NTT Communications has received notice from the Committee on Foreign Investment in the United States (CFIUS) that CFIUS will commence an investigation of NTT Communications' proposed acquisition of Verio pursuant to the Exon-Florio Amendment to the Defense Production Act of 1950," the company said in a statement.
CFIUS is an inter-agency committee chaired by the Secretary of Treasury that seeks to serve U.S. investment policy through thorough reviews that protect national security while attempting to maintain the U.S. policy on open and fair foreign investment in the country. The Exon-Florio Amendment allows for review of investment and, should the President find the investment under scrutiny unfit, the ability to block it.
"The only issues that NTT Communications is aware have been raised as part of the CFIUS review are requests by U.S. law enforcement agencies concerning law enforcement matters that relate to the Internet industry. NTT Communications believes that the proposed transaction does not raise national security concerns," the company's statement said.
The investigation comes as the U.S. Government is about to enter what could be the final rounds of negotiation with NTT East Corp. and NTT West Corp., sister companies of NTT Communications, over the issue of interconnection charges. The talks, which have been dragging on for more than a year, are scheduled to restart in Tokyo on July 10 and face a deadline of July 28 after which the U.S. is threatening to file a complaint against Japan with the World Trade Organization.
The Exon-Florio Amendment allows for an investigation of up to 45 days in length and an additional 15 days for final action by the President.
NTT said it has extended its tender offer for Verio shares, which was due to expire on Friday, June 30, for an additional 15 days until midnight EST on July 14. Under the company's terms of merger, NTT can elect to continue with the acquisition pending final judgement from CFIUS, it said.
As of June 29, approximately 43.13 million shares of Verio Inc. common stock, approximately 3.18 million shares of Verio Inc. preferred stock and approximately 1.21 million warrants to purchase shares of Verio Inc. common stock had been tendered, NTT said. The number is a reduction on the number of shares reported tendered as of June 15.
At that time, approximately 52.21 million shares of common stock and approximately 4.1 million shares of Verio preferred stock had been tendered. An NTT spokesperson explained that arbitragers have been withdrawing their tender offers as they try to find the best way to profit from the takeover attempt.
More information on CFIUS and the Exon-Florio Amendment can be found online at http://www.treas.gov/oii/.
NTT Communications, in Tokyo, can be found online at http://www.ntt-c.co.jp/.
Verio Inc., in Englewood, Colorado, is at http://www.verio.com/.