Motient, Rare Medium Merger - Done Deal : A wireless company to be reckoned with
May 15, 2001 (NewsFactor.com via COMTEX) -- Motient Corp. (Nasdaq: MTNT) has acquired Rare Medium Group (Nasdaq:
RRRR), the companies announced Monday. The deal is expected to close in the third quarter of 2001, according to Motient.
The new company will be a force to reckon with, as it combines the Internet professional services expertise of New
York-based Rare Medium with Motient's two-way wireless data and Internet services business, featuring eLink and
BlackBerry wireless e-mail products.
Combining Expertise
Motient, which said it owns and operates the largest wireless data network in the United States with some 226,000 users, will
acquire Rare Medium's range of wireless and e-business applications -- including strategic and technological consulting,
Web development, e-commerce systems integration, branding services, wireless application development and network
integration, and integration of wireless services with corporate intranets.
This merger was anticipated: In April, Rare Medium agreed to invest up to US$50 million in Motient on a short-term basis by
purchasing exchangeable notes of Motient.
$100M in Projected Revenues
The new venture will operate as Motient Corp. out of that company's headquarters in Reston, Virginia, with offices in Chicago,
New York, Atlanta, Dallas and California. The wireless networking and e-business application concerns will operate as
separate divisions, the company said.
Projected service revenues for the combined company are in the $100 million range, Motient said, noting that its employee
base will nearly double in size to 1,000.
Under the terms of the agreement, which is subject to approval of shareholders and regulatory agencies, each share of Rare
Medium's common stock will be exchanged for one-tenth of a share of new Motient preferred stock.
Each share of that preferred stock will have a liquidation preference of $20 and will be convertible into 6.4 shares of Motient
common stock. The preferred stock will have dividend and voting rights similar to the underlying common stock and will
automatically convert into Motient common stock if such stock trades at $3.13 or above for a 10-day period.
Motient Offers $13M, Radio Stock
Motient said it will offer 9 million shares of XM Satellite Radio (Nasdaq: XMSR) stock and $13 million in cash for Rare Medium
stock. Rare Medium's previous $25 million loan to Motient will be absorbed by the combined company upon closing of the
transaction, Motient said. At the closing of the transaction, Motient will repay $34 million of its bank debt.
In a joint statement, Rare Medium Group chairman and CEO Glenn S. Meyers and Motient president and CEO Walter V.
Purnell, Jr. said:
"The market for extension of Internet and corporate network applications across a nationwide wireless network is gaining
momentum. The combination of Motient's nationwide wireless data network with the e-business resources of Rare Medium
gives us the power to provide a compelling array of Internet solutions and to leverage those solutions wirelessly for
enterprise customers."
Purnell added, "By leveraging some of Motient's XM Satellite Radio shares and Rare Medium's balance sheet, the
combined company will be in a better position to finance the implementation of our business plan.
"As a result of the transaction, the company expects to be funded well into the first half of 2002 and expects to reach EBITDA
[earnings before interest, taxes, depreciation and amortization] breakeven around the same time frame."
Rare Medium Revenues
The transaction was approved unanimously by the directors of both companies, including a special committee of Rare
Medium's board of directors that was formed to review the transaction on behalf of shareholders.
Rare Medium, which said it has been exploring strategic alternatives in recent weeks, reported first-quarter revenue of $10
million from its Internet services business. Consolidated revenue for the first quarter was $8.6 million, representing a loss of
$1.09 per share.
The company provides Internet services including strategic, creative and technological consulting for e-business initiatives;
e-commerce; online brand development and management; and wireless and broadband applications.
By Jay Wrolstad
URL: motient.com
raremedium.com |
