Former leading US internet service provider, Prodigy Communications Corp, said yesterday it had struck a stock-based deal worth approximately $124m to acquire smaller rival, FlashNet Communications Inc. The acquisition is the firm’s third since floating on the Nasdaq stock exchange with a $120m initial public offering in February.
White Plains, NewYork-based Prodigy said the deal would add 244,000 new subscribers, swelling its total managed subscriber base to just over 1.5 million, including customers inherited from its recent purchase of small business web hosting company, BizOnthe.Net. Prodigy announced an agreement to buy BizOnThe.Net, a subsidiary of privately-held VarTec Telecom for $100m in September. In May Prodigy bought the US consumer internet service of Cable & Wireless Plc.
The terms of the FlashNet deal call for Prodigy to issue 0.35 of each of its common shares for each outstanding FlashNet common share. It will issue almost 5 million shares to close the deal, comprising about 7% of the company’s shares. The transaction’s value is based on Prodigy’s closing share price on Friday, before the deal was announced, of $24.75.
Fort Worth, Texas-based FlashNet touts specialized high-speed dedicated and broadband access, web hosting and e-commerce services to small-and mid-sized businesses. This is the same clientele that Prodigy targets with its specialized web hosting, site design tools and related services. FlashNet also offers web access, email, newsgroup access and web pages. In a single transaction, Prodigy acquires a talented pool of dedicated employees and significantly bolsters our infrastructure, customer service operations and acquisition channels, Samer Salameh, Prodigy’s chief executive said in a statement yesterday. FlashNet is an attractive acquisition target that further strengthens Prodigy’s position in the ISP marketplace, he added.
Prodigy said the deal does not need approval from its shareholders, while a significant percentage of FlashNet shareholders, who have to be consulted, have agreed to vote in favor of the deal. It said it expected the deal to close in the first quarter of 2000.
