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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: Jenna who wrote (119290)	12/17/2000 6:41:53 PM
From: puborectalis	Read Replies (3) \| Respond to of 120523

VerticalNet buys time on SierraCities.com deal Dec 15, 2000 10:00 AM ET By Peg Brickley, LocalBusiness.com NEWS ANALYSIS HORSHAM, Pa., and HOUSTON, Dec. 15 (LocalBusiness.com) -- VerticalNet Inc.'s play for a Houston-based online business finance firm has fallen short, prompting a play for more time to do the deal. Midnight last night was the deadline for SierraCities.com (Nasdaq: BTOB) to tender at least two thirds of its shares to be swapped, roughly 3-for-1, for shares in the operator of business-to-business Web hubs (Nasdaq: VERT). Down to the wire, SierraCities.com shareholders had tendered 12,674,851 shares, slightly short of the 12,699,093 shares needed to put the deal over the top. VerticalNet said this morning it had extended the tender to Dec. 29. Clear escape plan SierraCities.com has a clear out: The target could bust out of the buy if VerticalNet's average closing price for the deal calculation period is under $15 per share. VerticalNet's average closing price calculates out to well under $10 per share for the period, using the initial tender cutoff. Now that there's a new end-of-deal date, SierraCities.com could get a better price, depending on which way VerticalNet shareholders jump. At last night's closing price for VerticalNet, the Houston firm was looking at an aggregate price of about $53 million, rather than the $133 million it was worth when the deal was announced in early November. SierraCities.com netted $78.8 million in a June 1999 initial public offering, overallotment included. First VerticalNet test for new CEO VerticalNet CEO Joseph Galli Jr., looking at the first big deal of his tenure, apparently passed up the chance to walk away from SierraCities.com and call it a win. VerticalNet shareholders booed the buy from the start. They chopped the stock from the $29.50 per share it brought when the deal was announced Nov. 6 to yesterday's close of $8.37 per share. Investor distaste for SierraCities.com was a big reason VerticalNet's CEO was forced to bring such damaged currency to the deal table, according to one analyst. Coming in the midst of an ongoing slaughter in the technology market, VerticalNet's drop was more precipitous than that of comparable e-commerce powers. Ariba, Inc. (Nasdaq: ARBA), for example, dropped less than 50 percent during the period, while VerticalNet skidded more than 70 percent. That prompted Gerard Klauer Mattison analyst Alan Weichelbaum to blame market reaction against the SierraCities.com deal for a good chunk of VerticalNet's stock slide. Few analysts applauds deal The analyst, however, was one of a few who liked the combination. "I think it's a great deal for the company," Weichelbaum told LocalBusiness.com yesterday. SierraCities.com's systems removed one of the existing barriers to industrial-strength e-commerce: the lack of a mechanism to evaluate credit risk and finance deals online, Weichelbaum explained. "One of the hurdles to business-to-business transactions is that there was no way to credit-score them online and extend them the credit," the analyst said. "This closes the loop and this should increase transaction volume." Now for the "but," the issue that sent shivers down the spines of VerticalNet investors: For two to three months after the finance deals closed and a "flow partner" could be lined up to take them on, VerticalNet would hold onto the loans and leases. Dangling on risky hook The idea of the e-commerce pioneer's already chancy business dangling on the additional hook of interest rate and credit risk -- factors that have buried experienced finance companies -- did nothing to comfort shareholders. "The perception of the risk is kind of overblown," Weichelbaum said. "But finance is a very tough business. People go into it all the time and lose their shirts. When investors were spooked by this, I couldn't blame them."