Divine buying MarchFirst assets for up to $120 million
April 1, 2001
CHICAGO (AP) Ailing Internet consultancy MarchFirst Inc. has agreed to sell many of its assets to software company Divine Inc. in a deal valued at up to $120 million, Divine chief executive Andrew ”Flip” Filipowski announced Friday.
Divine is taking on 2,100 of MarchFirst’s 7,000 employees, Filipowski said. It wasn’t immediately clear how many of the remainder are losing their jobs.
Officials at MarchFirst, which according to published reports began its latest round of layoffs in the past two days, did not return repeated phone calls Friday and could not be reached after Divine’s late-afternoon announcement.
”I wish we could have brought on board more than the 2,100 people we did, but … we did what we did for prudent business reasons,” Filipowski said in a conference call with media and analysts.
Divine, the fallen Internet incubator that has become a software firm in a bid to recover from the high-tech crash, is paying $10 million in cash and a $60 million note, Filipowski said. An additional payment of $50 million will be made ”if cash flow far exceeds our expectations during that period of time,” he said.
The merged company will be known as Divine Whittman-Hart.
It will be headed by Edward Szofer, who was president of MarchFirst’s predecessor, Whittman-Hart, until it bought San Francisco-based USWeb/CKS Inc. in December 1999 for $5.7 billion in stock and changed names.
Both companies’ boards signed off on the deal and the transaction was expected to close by the end of the weekend, Filipowski said.
Under the deal, Divine would acquire $130 million plus worth of receivables, Filipowski said. Those include: ”19 or 20” MarchFirst offices; Virginia-based Web hosting firm HostOne; a $40-million consulting business based mainly in Denver; and the firm Blue Vector. Various offices of those firms are located in Europe, Asia and across the United States.
MarchFirst had laid off some 2,000 employees in recent months as demand for Internet consulting and services plummeted in a tightened economy. Its stock, which traded above $80 a share shortly after the merger 15 months ago, went into a nosedive that accelerated this week amid widespread reports that thousands more layoffs were imminent.