|
NTT offers $5.5B for Verio
|
 |
May 8, 2000: 1:22 p.m. ET
Japanese telecom operator starts global push with U.S. acquisition
|
LONDON (CNNfn) - Japan's Nippon Telegraph & Telephone (NTT) has signaled the start of a buying spree in Europe and North America after unveiling an agreement to pay $5.5 billion to secure control of U.S.-based Website manager Verio, boosting Japan's largest firm's plans to develop a global data business network.
|
|
VIDEO
|
|
CNN's Lisa Barron takes a closer look at NTT and Verio deal
|
|
Real
|
28K
|
80K
|
|
Windows Media
|
28K
|
80K
|
|
NTT Communications, a wholly owned unit of NTT, is offering $60 a share in cash to acquire the remaining 90 percent in Verio, after buying 10 percent of the U.S. company in May 1998. Verio (VRIO: Research, Estimates) shares rocketed 22-9/16 to 58-1/2 Monday.
"This is part of a broader process; there'll be more acquisitions," a Japanese analyst told CNNfn on condition of anonymity. The analyst pointed out the Verio takeover will make only a tiny dent in NTT's finances, and said similar-sized deals lie ahead. NTT has a market value approaching $200 billion.
The Japanese firm is dominant in its home market, but needs to expand globally as Japan gradually liberalizes its telecom system. NTT is the majority owner of NTT DoCoMo, Japan's largest cellular operator.
'Generous enough to win the day'
"This is a generous enough offer to win the day," commented analyst Stephen Murphy of CIBC World Markets, and, though he sees a rival bid for Verio as unlikely, he predicted other companies in the sector would be juicy targets. "There will be more bid activity; voice-centric companies need to expand beyond that (into data-related services), and they're much easier to buy than to build."
Murphy picked out former state-owned monopolies France Telecom (PFTE) and Deutsche Telekom (FDTE) as likely ambitious acquirers of U.S. technology firms. He identified AppliedTheory (ATHY: Research, Estimates) and PSINet (PSIX: Research, Estimates) as potential targets. AppliedTheory rose 2-9/16 to 14-3/8 Monday, while PSINet rose 2-5/8 to 25-1/8
Justin Jaschke, chief executive officer of Englewood, Colo.-based Verio, told CNNfn the deal offered "a very compelling valuation for Verio shareholders" and pointed to NTT's reach in Asia and success in migrating many of its cellular customers to its wireless Internet access service as good portents for the future.
NTT's move is seen as proof of its commitment to expand its Net-related services in the United States and Europe, though analysts were concerned about the parent's rising debt burden. Credit rating agency Standard & Poor's put NTT on its "Creditwatch" list with negative implications.
"The move is significant in a sense that it shows NTT's commitment to playing an active role in the global market," Makio Inui, an analyst at Nikko Salomon Smith Barney in Tokyo, told Reuters.
 The price tag represents a 67 percent premium over Verio's (VRIO: Research, Estimates) close of 35-15/16 on Friday.
NTT Communications aims to close the deal in the third quarter of the year, and said it would combine the Internet Protocol networks of the two firms, adding Verio's strength in the U.S. to its own fast-growing Asian operation.
The aim is to offer international and local voice and Internet data services for multinational clients, and compete with established global networks such as those run by MCI Worldcom (WCOM: Research, Estimates) and the Concert partnership of AT&T (T: Research, Estimates) and British Telecommunications (BT-A).
Verio manages Web sites for about 400,000 U.S. businesses, and NTT plans to use the firm to build data centers that will help clients to develop e-commerce services.
The purchase of Verio is NTT's largest-ever acquisition, and by far its largest push outside Asia. NTT has in recent months acquired minority stakes in the main telecom providers in the Philippines and Thailand, as well as Singapore's StarHub.
Verio held an initial public offering in May 1998 at $23 a share. Last year if reported a net loss of $182 million on revenue of $258 million. Its shares have slumped from a 52-week high of 84-15/16 as technology shares in the United States have fallen from favor.
NTT shares rose 2.8 percent Monday in a weak Tokyo market. 
-- from staff and wire reports
|
|
|
|
|
 |
|
