New York-based web design, consulting and integration company Razorfish Inc has acquired i-Cube Inc, a Cambridge, Massachusetts-based system integrator for about $677m in Razorfish stock. Razorfish is paying 0.875 a share for each i- Cube share and values them at about $24.72 each, which represents roughly a 16% premium over Monday’s closing price. Both boards have approved the deal and shareholder approval is expected.
There’s not a great deal of overlap between the two companies as Razorfish concentrates more on the front end user interface, while i-Cube is more of a ‘traditional’ systems integrator – although obviously it would not like that tag applied to it. Its name used to be International Integration Inc, but that’s been purged from its web site. In the same vein, Razorfish does digital change management rather than web makeovers.
The resulting company will employ around 1,000 employees in seven countries and will have combined revenues of about $35m in the second quarter this year, split almost evenly between the two. The annualized run rate is expected to be about $140m based on the current level of business. Razorfish says the combined company would be profitable as well – but it means at the EBITDA level; earnings before interest, taxation, depreciation and amortization.
At the net level, i-Cube recorded second-quarter profits of $472,000 after some $3.4m in acquisition related costs from an earlier transaction on revenues of $18.7m, including the revenues of the company it bought, Conduit Communications Ltd. Razorfish recorded second quarter net profits of $635,000 on revenues of $15.1m. The companies said there would be the usual merger- related costs but nothing out of the ordinary without being specific. The acquisition is expected to close in the fall and will be accretive to earnings in 1999 and 2000. Razorfish closed down $3.75, or 11.5% at $25.00, while i-Cube finished yesterday down $1.375, or 6.5% at $19.875.
