UPDATE: VeriSign to Acquire Network Solutions

BOSTON (03/07/2000) - VeriSign Inc. today announced a definitive agreement to acquire Network Solutions Inc. in an all-stock transaction valued at US$21 billion.

The combined company will be able to deliver a broad range of Internet infrastructure services required for electronic commerce, from establishing an online presence to delivering authentication and secure transaction services, the companies said in a joint statement.

Under the terms of the agreement, VeriSign will issue 2.15 shares of its common stock for each share of Network Solutions stock as constituted prior to the planned two-for-one split of Network Solutions stock on Friday, the companies said.

Valued at about $21 billion based on yesterday's closing price of VeriSign common stock, the transaction has already been approved by both companies' boards of directors, but is still subject to approval by VeriSign and Network Solutions stockholders, according to the statement.

The acquisition is expected to close in this year's third quarter, subject to customary conditions such as obtaining necessary regulatory approvals, the companies said.

Once the transaction is complete, Network Solutions will become a subsidiary of VeriSign, with Jim Rutt continuing to serve as Network Solutions' chief executive officer. Rutt will report to VeriSign President and CEO Stratton Sclavos, the companies said.

VeriSign provides online authentication, payment and validation services aimed to secure e-commerce transactions.

Network Solutions, meanwhile, is one of the Internet's leading domain name registrars and the exclusive registry and provider of .com, .net, and .org. registration services to 34 domain name registrars worldwide.

The merger will lead to a potent combination with small and medium-size businesses as the winners, according to John Pescatore, an analyst with Gartner Group Inc. Such businesses will now be able to obtain certificates for secure Web servers and other such VeriSign services when they sign up for domain names with Network Solutions, he said.

The down side is that offering such a one-stop shop will leave the merged company subject to scrutiny, because agencies such as the U.S. Federal Trade Commission and the U.S. Department of Justice, for instance, will want to be certain that VeriSign provides users with choices of certificate providers when they register domain names with Network Solutions, he said.

"I don't think it's something that will block the deal," Pescatore added.

Although Network Solutions is "slowly losing its monopoly" as a registrar now that the U.S. government has opened that process, the company remains a force in the market because it has a substantial installed base of customers, he said. Overall market share might drop, but the registrar business is so hot that "they're growth rate will still be high," Pescatore said.

As a consequence of that, VeriSign has agreed to pay a "stiff premium" to acquire Network Solutions, but "they are two one-of-a-kind companies, so you could see how a stiff premium would be paid," he said.

VeriSign, in Mountain View, California, is at Network Solutions, in Herndon, Virginia, is at