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June 6, 1997updated 05 Sep 2016 12:53pm


By CBR Staff Writer

Intermedia Communications Inc, a Tampa, Florida-based provider of local and long distance telecommunications services to the business and government communities, has acquired fellow Nasdaq-listed Digex Inc, a Washington, DC-based business internet service provider for a total of $150m, initially, rising to a possible $175m if certain warrnts are taken up by Digex management. The cash offer is for $13 for each Digex share, and the majority shareholders have already agreed to sell. Digex has more than 2,000 customers, 450 staff, and monthly annualized revenues of around $40m for March this year. The combined company would have annualized monthly revenue of $241m for the same month. Digex turned in net losses for the fourth quarter last year of $8.7m on revenues of $5.9m and net losses for the year to last December of $23.7m, compares to losses of $4.3m in 1995 on revenues of $15.6m. Intermedia says it expects to realize savings of approximately $4m in the second half of this year, $12m next year and $14m in 1999. It said it expects its third quarter results in the quarter in which the transaction will close, to be in line with analysts expectation for EBITDA: earnings before interest, tax, depreciation and amortization. The consensus estimate for losses per share for the year for Intermedia is $8.62. Intermedia was already closely watched with most analysts recommending it as a strong buy. Digex, on the other hand appeared to be heading in the other direction with spiraling losses and only modest revenue growth, but with a strong customer, and should benefit from the acquisition. This kind of purchase is doubtless a trend we will see more of in the future: telecoms companies buying ISPs, especially in the business and government space. Digex does a lot of web hosting, as well a straight business connections to the internet, and claims the worldÆs largest Windows NT web site management facility. Intermedia said approximately 75% of DigexÆs backbone network overlaps existing or planned Intermedia network routes. Intermedia said more than 80% of the major cities in the US are covered by the combined Intermedia and Digex. The Digex management will remain on charge of the unit, and there will be no job losses as a result of the acquisition.

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