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Technology Stocks : PSIX up 26.5%, Takeover(?) -- Ignore unavailable to you. Want to Upgrade?

To: Rubber Man who wrote (1860)	1/23/1998 10:07:00 AM
From: Ken Turetzky	Read Replies (1) \| Respond to of 5650

Technology & Telecommunications: PSINet Holders Set To Give Approval To Pact With IXC ---- By Jared Sandberg Staff Reporter of The Wall Street Journal The Wall Street Journal via Dow Jones Shareholders of one of the last independent Internet "backbone" operators are expected to approve an agreement today that could make it far more difficult for the company to be acquired -- a plan that has prompted some shareholder opposition. PSINet Inc., the Herndon, Va., company that operates a major artery of the Internet, is holding a meeting today at which shareholders are expected to approve an agreement with IXC Communications Inc., an Austin, Texas, company that builds fiber-optic networks. Under the deal, IXC would provide PSINet with 10,000 miles of fiber-optic capacity while IXC gets a 20% stake in PSINet. The terms guarantee that IXC's stake will be valued at $240 million a year after IXC delivers the capacity. If the stake falls short, PSINet must pay the difference in cash or stock. The deal "isn't in the interest of the shareholders," said PSINet shareholder Christopher McCleary, chief executive of a Washington-based start-up called USinternetworking Inc. On Tuesday night, Mr. McCleary made an informal offer to acquire PSINet. Mr. McCleary, who declined to identify his source of funding, pleaded with the company to postpone the shareholder vote and consider his offer of roughly $10 a share -- which was a nearly 50% premium over PSINet's share price at the time of the offer. On the Nasdaq Stock Market yesterday, PSINet closed at $9, up 56.25 cents, or 6.7%. Mr. McCleary added that "$10 is not the last price" he would consider. But yesterday, PSINet rejected the offer, saying that to entertain any offer would violate the company's agreement with IXC. Rival operators of major stretches of the Internet have been snatched up for hundreds of millions, or even billions, of dollars by phone giants like WorldCom Inc. and GTE Corp. Some shareholders complain that the management of the money-losing PSINet has missed such opportunities and won't seek a potential buyer. Two and a half years after PSINet went public, the company is trading below its initial offering price of $12 a share. Until recently, its market capitalization has languished at roughly $250 million, smaller than Internet companies in the more cutthroat, generally less-profitable business of providing consumers with access to the Internet. Mark Cordover, a PSINet shareholder and president of Institutional Trading Corp., said "the Street doesn't believe in PSINet's management. They are viewed that way because they have failed to execute." Some shareholders and analysts point to PSINet's unsuccessful entries into the software business and consumer Internet access, which cost the company millions of dollars. William Schrader, PSINet's chairman and chief executive officer, countered that people who speak of management problems "have an ax to grind" and are only concerned with the stock price. He said that Wall Street hasn't fully understood the company's strategy and that the company will experience a run-up in share price similar to other Internet companies "if we are allowed the opportunity." Mr. Schrader added that the IXC agreement will lower the company's cost of transmission capacity to one-tenth of what it now pays and shouldn't be substituted for a $10-per-share offer. "We think $10 isn't anywhere near the net present value of our enterprise," Mr. Schrader said. "This building is not for sale," he said, yet added that "if someone comes along with the right price, it's sold."