PSINet Announces Agreement for All-Cash Offer for iSTAR Internet; Anticipates Completing Acquisition in January
Announces Management Contract
TORONTO, Dec. 24 /PRNewswire/ -- PSINet Inc. (Nasdaq: PSIX) today announced that it has revised its previous offer and will now make an all-cash offer of approximately CDN $22 million, or CDN $0.75 per share, for iSTAR internet inc. (TSE: WWW) which is expected to be initiated and finalized in January 1998. PSINet expects to commence the tender offer to iSTAR shareholders on or before January 7, 1998.
"The modified offer will facilitate the integration of our networks, product lines and our companies' staffs in technical and customer support, sales and administration," said Nadir Desai, President of PSINet Limited, the Toronto-based Canadian subsidiary of PSINet. "The revised offer also is expected to accelerate the timing of the acquisition, and also speed implementation of the internal efforts which PSINet and iSTAR management have developed to improve services to all customers."
PSINet's original offer, announced November 10, was to acquire all of the outstanding common stock of iSTAR for CDN $1.206 per share in exchange for PSINet Inc. 8% convertible preferred stock which would be convertible in three tranches over a one year time period. The new offer provides liquidity at closing and greater certainty for iSTAR shareholders in return for a lower purchase price to PSINet.
A separate management agreement was also signed under which PSINet will manage iSTAR's normal business activities during the transition period until the revised offer is completed. The management agreement becomes effective when PSINet delivers a letter of credit under the agreement. The terms of the management agreement provide for PSINet to finance iSTAR's interim operations, and enable PSINet to consolidate certain activities in anticipation of a combined company.
"This management agreement allows PSINet flexibility to begin the network and business integration process immediately, thereby allowing PSINet to use its considerable network resources in the US to reduce the overall cost structure of iSTAR's global network connections," said Pete Wills, Executive Vice President and Chief Operating Officer of the parent company, PSINet Inc. "This agreement also is designed to ensure that iSTAR's customers will continue to receive the full benefit of iSTAR's current services."
The revised acquisition agreement calls for PSINet to deliver to iSTAR an irrevocable letter of credit for the aggregate purchase price prior to December 31, 1997. PSINet Inc. will be using third party and bank financing for the acquisition, all closing costs, as well as the integration costs it expects to incur during the first half of 1998. The company expects, subject to completion of a final valuation study, to record a CDN $10 million charge for in-process research and development related to the iSTAR merger in the first quarter. "Furthermore, given the high quality revenue from iSTAR commercial customers, we expect the acquisition to become accretive to EBITDA during late 1998, and to provide a substantial contribution to EBITDA in 1999 and beyond," said Wills.
The modified offer will be subject to the tender of at least 51% of the outstanding shares, there not being a prohibition at law against PSINet acquiring all shares tendered in Canada, and the exercise or cancellation of all outstanding warrants and options.
About PSINet PSINet is a leading provider of turn-key corporate Internet and intranet access, managed security services, electronic commerce solutions and Web hosting services throughout the United States and abroad. PSINet manages one of the world's largest and most advanced fast-packet networks, which provides state-of-the-art, high speed Internet access ranging from dedicated high-speed circuits to ISDN to high-speed modem dial-up. PSINet backs up its state-of- the-art network with the industry's original service guarantee, employing automatic back-up systems and crediting for service outages.
Headquartered in Herndon, Va., PSINet has offices throughout the U.S. and subsidiaries in Canada, Japan and Europe, including Belgium, France, Germany, the Netherlands, Switzerland, and the U.K. For more information contact PSINet by phone at 703-904-4100, by e-mail at info@psi.com or by accessing the corporate World Wide Web site at psi.net.
About iSTAR iSTAR internet inc. was incorporated in August 1995 and became a publicly traded company in November 1995. It is Canada's leading Internet solutions company providing advanced Internet services for businesses, institutions and individuals. More information on iSTAR can be obtained via the World Wide Web at istar.ca.
Certain of the statements made in this release are forward-looking statements that are subject to material risks and uncertainties. Actual results could differ materially, as a result of a variety of factors, including competitive developments, risks associated with the Company's growth, the development of the Internet market, regulatory risks and other risks which are discussed in the Company's fillings with the Securities and Exchange Commission.
SOURCE PSINet Inc.
CO: PSINet Inc.; iSTAR internet inc. |
