UNCONFIRMED REPORT: CMGI to buy divine interVentures:
If this **rumor** is true, and apparently the reporter thinks it is, it would turn out to be quite the bombshell. I must admit i'd be surprised with such a turn of events.
Depending on how you look at it, the reporter (Ron May) is either the most diligent reporter for Chicago-area venture capital and Internet news. Or a wanna-be gossip queen about the local business power scene.
To his credit, he's written some breaking news on stuff pertaining to the Whittman Hart [like DVIN, a chicago company]/USWeb merger Y2K problems with Zacks (another chicago company which TheStreet.com quoted him on), etc. So it's worth a read, even if it's only a rumor.
themayreport.com
Anyway, here's what he sent out to his mailing list.
--- Ron <ron@themayreport.com> wrote:
> Date: Fri, 14 Apr 2000 03:59:40 -0500
> To: "The May Report"
> <mayreport@list.themayreport.com>
> From: Ron <ron@themayreport.com>
> Subject: The May Report: 4/14/2000: By far this
> report's biggest scoop IF
> it is true.... CMGI in discussions to buy divine,
> possibly for $2.5 to
> $3B.
>
> April 14, 2000
>
> The May Report
>
> by Ron May
>
> Your inside source on Chicago's high tech community
>
> The May Report: 4/14/2000: By far this report's
> biggest scoop IF it is
> true.... CMGI in discussions to buy divine, possibly
> for $2.5B to $3B.
>
> ++++++ Contact Information+++++
>
> 773.871.2000 x.1 or 312.670.6336 for Ron May
> Claire Dolinar (executive assistant): 773.871.2000 x
> 2
>
> 773.871.4933 (Fax).
>
> For personal & confidential 312.670.6336
> E-mails to ronaldmay@aol.com or ron@themayreport.com
> ________
>
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> +++++++++++++++++
>
> There is only one way to do this --- just tell it,
> all the facts and my
> sense of them, just as they happened.
>
> About 7:15 p.m. Thursday evening, just as I was
> ready to send out an
> article, I got a call. The caller said he wished to
> remain anonymous. He
> told me that he knows me, and that we have met at
> various meetings, and
> that I know him well enough not to ask for his card.
>
> He started by joking about how he had a story about
> the company I love to
> hate, or words to that effect. I was cagey and did
> not even use the name
> Flip or divine. We both knew who he was talking
> about. Then he told me what
> he had heard.
>
> Here is exactly what he said: 1. He heard from a
> large investor in CMGI
> that CMGI is going to buy divine and that this is
> the reason there is no
> last minute S-1 filing; 2. That Flip will cash out
> with $80MM to $100MM
> profit on his money; and 3. That they are waiting
> for an uptick in the
> market to announce it.
>
> He added that $80MM to $100MM profit is "not bad for
> nine months' work." I
> had told him that Flip put in $20MM, so that means
> that the multiple on the
> initial investment is five to six.
>
> I asked him about the reliability of his source and
> he said that the guy is
> very reliable, but he did encourage me to check
> around and see what I can
> find out. He seemed a bit concerned that I should
> not publish the
> information until I got some confirmation.
>
> He said that the guy who told him is "long in the
> tooth." I asked him what
> that meant just to be sure there was no
> misunderstanding and he said the
> guy had been around for a long time in technology
> and that the deal is all
> but done.
>
> Then, at 10:44 p.m., I got this call on my voice
> mail: "Thought you would
> like to know that divine interventures is talking
> with CMGI and it is
> called a sale and it is pre-IPO. FYI. My name's
> xxx." I did not recognize
> the name, and he only gave what appeared to be his
> last name.
>
> The second call in three and half hours sealed it. I
> have to go with it, at
> least as a strong rumor. If it is true, it is by far
> my greatest scoop
> ever, but it is funny, I am not thinking about
> "scoops" right now. Those
> are the facts. The rest is commentary and analysis.
> Why should I decide to
> become a journalist now? Why separate the two when
> you can mix them up all
> in one sentence?
> _____________________
> I am actually nervous and in a state of shock as
> well as a having a sense
> of sadness. I am filled with an empty feeling,
> almost numbness. Where does
> this leave us in Chicago high tech?
>
> I did some number crunching. If you put in $20MM and
> get $100MM or $120MM
> back, that means the overall deal is for about $2.5B
> or $3B which seems to
> me to be in the ballpark. A stock price of $7 for
> about $500MM initially
> invested in divine would put divine's market cap at
> about $3.5B or seven
> times the money in, just a little more than my
> caller indicated this deal
> would go down for. That $7 figure is antediluvian.
>
> If it is a stock swap, CMGI has market cap of about
> $18.54B, so they should
> be able to afford it. Saying something like that is
> well beyond my scope of
> knowledge.
>
> At one level this rumor, if true, runs so much
> against the grain. You ask
> yourself: Why would Flip do this? Isn't this so much
> the opposite of what
> he has been trying to build in Chicago? Isn't this a
> case of premature you
> know what? Why this when the people at divine have
> been working 18 hour
> days to make their own IPO successful? Where would
> this leave the people of
> divine, the average Joe?
>
> All of this goes through my mind: the hometown pride
> factor, the divine
> build-up, the name, the marketing, the zaibatsu
> philosophy, the many local
> firms they have funded, the huge number of people
> they have hired, the
> involvement level of so many key local players, the
> commitment of the Mayor
> and the Governor, the sense of excitement and daily
> fascination that has
> accompanied this. Something to be proud of as a
> Chicago high tech success....
>
> Then I think, CMGI just bought uBid and YesMail.
> CEOs Greg Jones and Dave
> Tolmie are both on Flip's board and both are
> buddies.
>
> Is there a fear factor that could be driving this? I
> think of Flip's famous
> shower and his feeling of sheer terror. I think of
> the initial impetus
> behind the expansion of Platinum, the first company
> Flip went out and
> bought and then the next forty, ultimately to be
> seventy. That was driven
> at first by a realization that the DB/2 market was
> dying.
>
> The last couple of weeks has struck fear in the
> hearts of any internet
> entrepreneur.
>
> I have to report this because if I do not and it
> turns out to be true, I am
> doing a great disservice to you, members of the
> Chicago high tech
> community. If it turns out to be false, everyone can
> sigh relief (one would
> think) and all that has happened is that a high
> level of "buzz" has been
> generated.
>
> I think of it this way: if I am an employee at
> divine who is busting my
> butt every day to make things happen, I would sure
> want to know about this
> before it becomes a surprise announcement.
>
> Trust me: divine employees do not know. In fact, I
> would be surprised if
> more than a handful of people there do know. Flip,
> Mike and Paul plus maybe
> Larry Freedman, their internal lawyer.
>
> My reluctance to publish this rumor has more to do
> with my own
> disappointment and shock by it than the possibility
> that it is true. At one
> level it gives me goose bumps because I believe in
> Chicago high tech at the
> bottom of my heart. This leaves us, well .... you
> know.
>
> All my yapping aside, I really do hope that divine
> will be a big success.
> It is our company. It is a Chicago creation, top to
> bottom. Who in Chicago
> high tech doesn't know dozens of people who work for
> divine, one of their
> portfolio firms, or one of their investors or
> service vendors? I personally
> know three hundred or more of them.
>
> All the hopefulness aside, there is hard reality and
> that hard reality has
> come home in the last week. Then the pure business
> hat has to be put on.
> Perhaps the deal makes sense. The pullback in the
> IPO share offering was
> the first sign of fear and retrenchment --- driven
> by the fear of ravages
> from the public market.
>
> I hope that Flip is thinking about his people and
> not just his investors
> though. It would be a great disappointment to
> realize that this is a
> selfish move, if it turns out to be that. He has
> almost a cult following in
> the firm and there is a high sense of comraderie.
>
> CMGI is trading at $66, not far above its 52-week
> low. The 52-week range
> has been $33 to $163. The price of the stock is now
> down to where it was
> around the 20th of November. So, CMGI has taken a
> huge hit this month
> alone. It was close to $150 in early March and hit
> its peak in early January.
>
> Does CMGI's low stock price work in favor of the
> deal? That was Greg Jones'
> argument with the sale of uBid. Also, if divine's
> "comps" are CMGI and ICG,
> where does that leave divine's stock when it does go
> public.
>
> CMGI has a market cap of $18.54B, down a good $15B
> to $20B from its high.
> By the way, I just went on Raging Bull looking for
> any rumors about this deal.
>
> Here is the link to that page:
>
> ragingbull.com
>
> CMGI's volume was quite high yesterday: 9.76 million
> versus an average of
> 7.35 million. It was also the most active stock on
> the Raging Bull
> discussion board yesterday.
>
> We have no idea what the bankers and the analysts
> have been telling Flip in
> the last week. We have no idea how much support
> divine has or has not been
> getting in the market.
>
> I am crossing my fingers and hoping that whatever
> happens, it turns out for
> the best and to be the right thing to do.
>
[END EMAIL]
- Netconductor.com
>>Edwin Fujinaka wrote:
[...]CMGI also owns a piece of DVIN. |
