The Wall Street Journal -- September 14, 1998
Qwest to Unveil Pact to Acquire Icon CMT Corp.
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By Stephanie N. Mehta
Staff Reporter of The Wall Street Journal
Qwest Communications International Inc. plans to announce today that it has agreed to acquire Internet service provider Icon CMT Corp. in a stock deal that Qwest values at about $185 million, about a 60% premium over the company's market value Friday.
Qwest, a Denver-based telecommunications company, is building a nationwide network based on Internet technology. The acquisition of Icon would allow Qwest to offer a broader menu of Internet-related services to large corporate clients. Icon, based in Weehawken, N.J., sells Internet access, Web hosting and network-management services to large businesses.
"This is the first service offering that articulates the vision that we've been talking about," Joseph P. Nacchio, Qwest's chief executive officer, said in an interview. "People said we were just another long-distance company. Not quite."
The acquisition also would allow Qwest to leverage its fiber-optic network, which is robust but lacks the heavy traffic volume of rivals such as MCI Communications Corp. and AT&T Corp.
Qwest is paying a nice premium for an Internet-related company at a time when technology stocks are in the doldrums: According to people familiar with the negotiations, Qwest is offering $12 in stock for each share of Icon, whose shares on Friday closed unchanged at $7.25. But that is much cheaper than the stock's 52-week high of $28.75, and it had been trading in the midteens prior to the stock market sell-off. Qwest's valuation of the deal excludes working capital and proceeds from the exercise of warrants.
In Nasdaq Stock Market trading Friday, shares of Qwest rose $2.0625 to close at $28.8125.
Icon already operates Web-hosting facilities, but Qwest is expected to announce a broader push into that business, Mr. Nacchio said. Qwest is expected to launch 10 "CyberCenters" by 1999 to manage customers' Web sites. And in November, Qwest will begin offering corporate customers a new category of service designed to give software and computer clients "always on" access to the Internet and corporate intranets.
Icon, formed in 1991, targets businesses in the financial, pharmaceutical, media and telecommunications industries. The company, which has about 400 employees, last year posted a $13 million loss on sales of $47 million. |
