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Re: DIGEX Acquired?
- From: Declan McCullagh
- Date: Thu Jun 05 19:40:18 1997
On Thu, 5 Jun 1997, Rodney Joffe wrote:
> Rumor has it that DIGEX was just acquired by Intermedia Communications
> (a CLEC from Tampa!).
> Does anyone know anything?
Maybe this will clear things up.
Date: Thu, 5 Jun 1997 14:51:28 -0400 (EDT)
From: Doug Humphrey <firstname.lastname@example.org>
You might all ask "what does this mean?" Well, it is pretty
straight-forward. ICI is buying Digex as a complete operation,
and other than the fact that they have about $400 m in cash
sitting around, there won't be a lot of changes here at Digex.
We are continuing to operate the company, we aren't moving to
Florida, they aren't moving up here, etc.
It should be a good deal for us here at Digex. It is our opinion
that the Internet world is going to get a bit tougher, with a need
for capital, and there are a lot of good fits between us and ICI
so we decided to team up.
I doubt that there will be much decernable change any time soon.
DIGEX Service Update: DIGEX Acquired by ICI - 6/5/97
Dear DIGEX Customer:
DIGEX today announced the combination of the firm with Intermedia
Communications (ICI) of Tampa, Florida. (See attached Press Release).
We want to share with you, our customers, what the implications of this
combination of firms will mean for your business.
First: There will be no contract or term changes, and all of your services
and the rates for same will remain as contained in your present contract.
There will be no changes in the products or delivery mechanisms, or
telephone numbers, personnel, or e-mail addresses for support of the
services that you have acquired from DIGEX. Our service quality excellence
will continue as in the past and in fact be enhanced, given the depth of
resources (human and financial) that this combination enables. Service
quality will continue to be our mantra, for we believe this is a
distinguishing characteristic of our Corporation. In fact, you have told us
as much, in both surveys, and the vote of confidence you have provided us by
fueling our tremendous revenue and customer growth in the industry.
Second: In the future we expect to have additional product offerings and
enhancements, given the present and planned ICI service offerings and
enhancements. We also expect to expand the geographic reach of our network
and thus the business markets that we can serve. In fact, we believe this
combination will provide for significant POP and market expansion, given the
network integration potential that exists from this combination.
Let me assure you of one abiding and guiding light for DIGEX that will
absolutely NOT change SERVICE QUALITY. That has been a differentiating
characteristic for DIGEX and ICI , and we will continue that focus and
emphasis. In addition, we will continue our sales and marketing efforts
directed towards the business market as in the past.
Should you have any specific questions concerning this combination, please
visit our web site at <http://www.digex.net - we will post details as they
are available for distribution.
Clyde A. Heintzelman
President, Business Connectivity Unit
-Press Release Start-
INTERMEDIA COMMUNICATIONS TO ACQUIRE DIGEX INCORPORATED BUSINESS EDITORS
TAMPA, Fla.--(BUSINESS WIRE)--June 5, 1997--
COMBINATION EXTENDS INTERMEDIA'S LEADERSHIP POSITION IN FAST-GROWING
BUSINESS DATA COMMUNICATIONS MARKET
Intermedia Communications (ICIX: Nasdaq/NM) and DIGEX Incorporated (DIGEX)
(DIGX: Nasdaq/NM) today announced that they have executed a definitive
agreement for the acquisition of DIGEX by Intermedia for $13 per share or
approximately $150 million. The acquisition will be consummated through a
tender offer for all outstanding DIGEX shares, which will begin next week
and will be followed by a cash merger. Management and other DIGEX option
holders will receive Intermedia stock options for their DIGEX stock options,
in lieu of receiving cash. The acquisition was unanimously approved by the
Board of Directors of both companies, and shareholders owning a majority of
the outstanding shares of DIGEX have agreed to sell their shares to
Intermedia for $13 per share. Intermedia will host a conference call at 9:00
AM EDT to discuss this transaction. To participate in this conference, call
(800) 236-9153. A 24-hour replay will be available by calling (800)
633-8284, ID 2832850.
DIGEX is among the limited number of national First Tier Internet service
providers which positions the company to be a strong participant in the
fastest growing sector of the Internet market--business connectivity. It is
also a market leader in Web hosting and management and operates the world
7/8s largest Microsoft NT Web site management facility. DIGEX has over 2,000
customers and a staff of 450 people, including approximately 150 in sales
and marketing. Monthly annualized revenue was approximately $40 million for
March 1997. The combined company would have had annualized monthly revenue
of $241 million for the same month, with 37% of that total from enhanced
data services. The combined company will have over 18,000 business and
government customers, and over 1,500 employees.
EXCELLENT STRATEGIC FIT
"A fundamental element of Intermedia's mission and a key to its success in
acquiring business telecom market share is the continued expansion of our
strong leadership position in enhanced data services," commented David C.
Ruberg, Intermedia's Chairman, President, and Chief Executive Officer. "This
acquisition meets all of our criteria for strategic acquisitions. Intermedia
is acquiring an established quality customer base, accelerating its time to
market with new services, expanding and increasing network density, and
adding high quality employees. With this acquisition, Intermedia becomes a
provider with one of the broadest portfolios of high value- added data
services integrated with traditional local and long distance voice services.
The combined company will have a strong base of Internet connectivity
services. These will enable Intermedia to expand delivery of a wide range of
hosted business applications including multimedia applications, supporting
the needs of electronic commerce." SIGNIFICANT FINANCIAL SYNERGIES
"Significant financial and operational synergies will be realized upon
integrating the two companies," added Robert M. Manning, Intermedia's Chief
Financial Officer. "We expect to realize minimum cost savings of
approximately $4 million in the second half of 1997, $12 million in 1998,
$14 million in 1999, and increasing savings in subsequent years."
Approximately 75% of DIGEX's backbone network overlaps existing or planned
Intermedia network routes. Additional savings should result from
substantially greater purchasing power for leased backbone circuits, from
CLEC interconnection agreements, and from Intermedia's owned local network
facilities. Lastly, the most significant benefit should come from combining
the sales efforts and cross-selling services to the 18,000 business
customers of the combined company. These opportunities were not included in
Intermedia's estimate of synergies. Manning reported that Intermedia expects
the transaction to close in the third quarter of 1997. The resulting third
quarter EBITDA for the combined company is expected to be within the current
range of analysts' expectations for Intermedia. "With the synergies we
expect, and the continued rapid growth in DIGEX's business, this acquisition
should accelerate our progression toward positive free cash flow and adds
meaningfully to EBITDA beginning in 1998," he added.
"After elimination of the duplicate network facility costs, Intermedia will
have acquired a rapidly growing revenue stream with attractive margins that
provide significant incremental return on its already invested capital
infrastructure," Manning concluded. DIGEX's current network deployment and
customer base are concentrated in the large city markets in the eastern
U.S., with service also provided in major west coast markets. Over 80% of
the cities served are covered today by both Intermedia and DIGEX, increasing
the density of Intermedia's already robust network in the eastern U.S.
MCCLEARY TO CONTINUE LEADING THE DIGEX ORGANIZATION
Chris McCleary, DIGEX's current Chairman, President, and Chief
Executive Officer, and his management team will continue to manage
the DIGEX operation. "Chris has done an excellent job of building a
team and a business," commented Ruberg. "We will maintain the
focus he has developed by supporting all of his team's efforts with
Intermedia's resources throughout our service territory. "DIGEX's
consultative selling approach matches Intermedia's; and the DIGEX
customer base and target markets reinforce Intermedia's, allowing us
access to more cross-selling opportunities in these markets," added
Ruberg. "The skills needed to effectively sell DIGEX's current
services provide an excellent foundation for the DIGEX staff to sell
Intermedia's full suite of integrated voice and data telecom services."
Headquartered in suburban Washington, DC, DIGEX is a leading independent
national Internet carrier focusing exclusively on business customers. DIGEX
offers a comprehensive range of Internet solutions, including high-speed
dedicated business Internet connectivity, corporate Web site management
services and private network capacity. The DIGEX Gold Ring(SM) national
fault-tolerant fiber optic Internet network, engineered utilizing Cisco
Systems (NASDAQ: CSCO) Internet Operating System technology, provides highly
reliable service for mission-critical Internet applications. Company news,
product, and service information are available at www.digex.net . Intermedia
Communications is one of the nation's fastest growing telecommunications
companies. Intermedia provides integrated telecommunications solutions to
business and government customers. These solutions include voice, data, and
video; local and long distance services; and advanced access services in
cities throughout the eastern U.S. Its enhanced data offerings, including
frame relay, ATM, and Internet services offer seamless end-to-end service
virtually anywhere in the world.
Intermedia is headquartered in Tampa, Florida, and is traded on the Nasdaq
National Market under the symbol ICIX. Intermedia can be found on the World
Wide Web at <http://www.icix.net . Bear, Stearns & Co., Inc. acted as
exclusive financial advisor to Intermedia Communications for this
transaction. Friedman, Billings, Ramsey & Co., Inc. was the financial
advisor for DIGEX Incorporated.
Statements contained in this news release regarding expected revenues and
other planned events are forward-looking statements, subject to
uncertainties and risks, including, but not limited to, the demand for
Intermedia's products and services, and the ability of the Company to
successfully implement its expanded and accelerated capital deployment plan,
each of which may be impacted, among other things, by economic, competitive
or regulatory conditions. These and other applicable risks are summarized
under the caption "Risk Factors" in the Company's Form 10-K Annual Report
for its fiscal year ended December 31, 1996.