Divine pays $120M for parts of Web firm MarchFirst, thousands of jobs may go
CHICAGO, Mar 30, 2001 (The Canadian Press via COMTEX) -- Ailing Internet
consultancy MarchFirst Inc. has agreed to sell many of its assets to software
company Divine Inc. in a deal valued at up to $120 million US, Divine chief
executive Andrew Filipowski said Friday.
Divine is taking on 2,100 of MarchFirst's 7,000 employees, Filipowski said. It
wasn't immediately clear how many of the rest are losing their jobs.
Officials at MarchFirst, which according to published reports began its latest
round of layoffs in the past two days, did not return repeated phone calls
Friday and could not be reached after Divine's late-afternoon announcement.
"I wish we could have brought on board more than the 2,100 people we did, but
... we did what we did for prudent business reasons," Filipowski said in a
conference call with media and analysts.
Divine, the fallen Internet incubator that has become a software firm in a bid
to recover from the high-tech crash, is paying $10 million in cash and a
$60-million note, Filipowski said.
An additional payment of $50 million will be made "if cash flow far exceeds our
expectations during that period of time," he said.
The merged company will be known as Divine Whittman-Hart.
It will be headed by Edward Szofer, who was president of MarchFirst's
predecessor, Whittman-Hart, until it bought San Francisco-based USWeb/CKS Inc.
in December 1999 for $5.7 billion in stock and changed names.
Both companies' boards signed off on the deal and the transaction is expected to
close by the end of the weekend, Filipowski said.
Under the deal, Divine would include "19 or 20" MarchFirst offices,
Virginia-based Web hosting firm HostOne and a $40-million consulting business
based mainly in Denver. Various offices of those firms are in Europe, Asia and
across the United States.
MarchFirst had laid off some 2,000 employees in recent months as demand for
Internet consulting and services plummeted in a tightened economy.
Its stock, which traded above $80 a share shortly after the merger 15 months
ago, went into a nosedive that accelerated this week amid widespread reports
that thousands more layoffs were imminent.
Trading in MarchFirst shares was halted in mid-session Wednesday with the price
down to 16 cents on the Nasdaq Stock Market, which said it had requested
additional information from the Chicago company. Shares of Divine rose 17 cents
to close at $1.62.
Francisco Partners, a San Francisco investment firm, bought a controlling 32 per
cent stake for $150 million in December. That company has been cutting costs and
selling assets to raise cash to satisfy MarchFirst's creditors.
Despite Divine's own struggles, Filipowski said he expects the newly acquired
assets will generate over $250 million annually and be immediately profitable.
"We are constructing a three-pronged software services company," he said. "This
particular asset acquisition really provided some very substantial assets for
three of the four operating units we have. ... In the next 12 to 18 months, we
believe we'll emerge as a very profitable company."
Divine, formerly known as Divine Interventures, lost $509.9 million in 2000 on
$44.1 million in revenue in its first year of operation.
The online source for news sports entertainment finance and business news in Canada
Copyright (C) 2001 The Canadian Press (CP), All rights reserved
KEYWORD: CHICAGO
SUBJECT CODE: technology
CHICAGO, Mar 30, 2001 (The Canadian Press via COMTEX) -- Ailing Internet
consultancy MarchFirst Inc. has agreed to sell many of its assets to software
company Divine Inc. in a deal valued at up to $120 million US, Divine chief
executive Andrew Filipowski said Friday.
Divine is taking on 2,100 of MarchFirst's 7,000 employees, Filipowski said. It
wasn't immediately clear how many of the rest are losing their jobs.
Officials at MarchFirst, which according to published reports began its latest
round of layoffs in the past two days, did not return repeated phone calls
Friday and could not be reached after Divine's late-afternoon announcement.
"I wish we could have brought on board more than the 2,100 people we did, but
... we did what we did for prudent business reasons," Filipowski said in a
conference call with media and analysts.
Divine, the fallen Internet incubator that has become a software firm in a bid
to recover from the high-tech crash, is paying $10 million in cash and a
$60-million note, Filipowski said.
An additional payment of $50 million will be made "if cash flow far exceeds our
expectations during that period of time," he said.
The merged company will be known as Divine Whittman-Hart.
It will be headed by Edward Szofer, who was president of MarchFirst's
predecessor, Whittman-Hart, until it bought San Francisco-based USWeb/CKS Inc.
in December 1999 for $5.7 billion in stock and changed names.
Both companies' boards signed off on the deal and the transaction is expected to
close by the end of the weekend, Filipowski said.
Under the deal, Divine would include "19 or 20" MarchFirst offices,
Virginia-based Web hosting firm HostOne and a $40-million consulting business
based mainly in Denver. Various offices of those firms are in Europe, Asia and
across the United States.
MarchFirst had laid off some 2,000 employees in recent months as demand for
Internet consulting and services plummeted in a tightened economy.
Its stock, which traded above $80 a share shortly after the merger 15 months
ago, went into a nosedive that accelerated this week amid widespread reports
that thousands more layoffs were imminent.
Trading in MarchFirst shares was halted in mid-session Wednesday with the price
down to 16 cents on the Nasdaq Stock Market, which said it had requested
additional information from the Chicago company. Shares of Divine rose 17 cents
to close at $1.62.
Francisco Partners, a San Francisco investment firm, bought a controlling 32 per
cent stake for $150 million in December. That company has been cutting costs and
selling assets to raise cash to satisfy MarchFirst's creditors.
Despite Divine's own struggles, Filipowski said he expects the newly acquired
assets will generate over $250 million annually and be immediately profitable.
"We are constructing a three-pronged software services company," he said. "This
particular asset acquisition really provided some very substantial assets for
three of the four operating units we have. ... In the next 12 to 18 months, we
believe we'll emerge as a very profitable company."
Divine, formerly known as Divine Interventures, lost $509.9 million in 2000 on
$44.1 million in revenue in its first year of operation.
The online source for news sports entertainment finance and business news in Canada
Copyright (C) 2001 The Canadian Press (CP), All rights reserved
KEYWORD: CHICAGO
SUBJECT CODE: technology
