GBLX to spin out Global Center?
GlobalCenter Gets Ready to Come Out -- Again
By Spencer E. Ante
Staff Reporter
1/28/00 8:00 AM ET
GlobalCenter scrapped its plans to go public back in the fall of 1997 when it was acquired by long-distance carrier Frontier. But if GlobalCenter's new leader and cable industry legend Leo Hindery has his way, the Web-hoster may finally get to throw its coming-out party as a pure-play Net company.
GlobalCenter is the second-largest Web-hosting company, right behind industry leader Exodus (EXDS:Nasdaq - news). Web-hosters house a corporation's Web servers, hook it up to the Internet and help it build and manage its e-commerce sites. But it's hard to size up GlobalCenter. The problem is that it's trapped inside the international fiber-optic cable builder Global Crossing (GBLX:Nasdaq - news), which absorbed GlobalCenter when Frontier sold out to Global Crossing in September of 1999 for $11.2 billion. But if Hindery is able to spin out GlobalCenter in the next six months, analysts suggest that it could unlock billions of dollars in shareholder value for Global Crossing investors and strengthen the hand of the Web-hoster.
"GlobalCenter is one of the crown jewels inside" Global Crossing, says Allan Harris, an analyst with Munder Capital, which is long Global Crossing. "With Hindery, they have one of the smartest minds out there who knows how to build shareholder value."
Valuing GlobalCenter
When Hindery became chairman and chief executive officer of GlobalCenter in December, the former AT&T (T:NYSE - news) executive said he hoped to take GlobalCenter public within six months. In an interview with TheStreet.com, Hindery confirmed those plans and said he was interested in growing the business in preparation for an IPO.
"I think [Global Crossing and GlobalCenter] will perform better and function better side by side than one under the other," said Hindery. "You'll probably see us do some transactions, trying to grow the business, all with the agenda of sometime in 2000 -- not late in 2000, earlier than later -- taking the company public."
Analysts say Hindery has a good shot of meeting that goal. And they agree that GlobalCenter would operate better as a publicly traded, standalone company. Matthew Janiger, an analyst with Lazard Freres who covers Global Crossing, says a GlobalCenter IPO would help sharpen the company's operational focus, retain and recruit employees, and give it currency with which to make acquisitions or investments. If GlobalCenter goes public, analysts say Global Crossing and its investors are likely to profit by holding a majority stake in the independent company.
"I think it will create value for Global Crossing," says Janiger, who maintains an outperform rating on the company, his firm's second-highest rating.
It's not clear what GlobalCenter would command on the open market, but analysts say Exodus provides a useful comparison. Exodus claims a market capitalization of more than $21 billion, compared to a $40 billion market cap for all of Global Crossing. (Not bad considering that Frontier bought GlobalCenter in an all-stock deal for just under $180 million.) Overall, GlobalCenter measures up as a strong second against Exodus. Exodus is expected to report $242 million in revenue in 1999. The Los Angeles Times reported that GlobalCenter earned $200 million. Exodus ended the year with 2,285 customers; GlobalCenter ended the third quarter with more than 500 of its own, including marquee names like Yahoo! (YHOO:Nasdaq - news), Viacom (VIA:NYSE - news) and the Motley Fool. |
