Netcom shares soar on buyout bid
Shares of Netcom On-Line Communications Services Inc. soared $5.81 per share, or more than 38 percent, to $20.94 Monday after ICG Communications Inc. said it will acquire the Internet service provider for $283.5 million in stock.
If approved by executives at both firms, the deal would allow ICG to add one of the world's largest independent ISPs to its stable of telecommunications and satellite services.
Under the terms of ICG's offer, Netcom's shareholders would receive ICG stock equivalent to about $22.65 for each Netcom share.
ICG's stock was off $1.25 Monday to close at $25.
The proposed deal is just the latest in a series of telecommunications mergers and proposed mergers as the industry continues to consolidate itself to offer a soup-to-nuts package to corporate customers.
Analysts said last week's $33.5 billion bid by WorldCom Inc. for MCI Communications Corp. shows the industry is moving at a frenetic pace and those companies that don't make aggressive strategic moves could quickly fall by the wayside.
"One of the things that will be real in the next couple years is voice over IP," said Charlie Pluckhahn, an analyst at Dain Bosworth. "I don't mean over the public Internet, but over corporate intranets. This deal will give ICG the expertise it needs with corporate intranets to expand its services and customer base."
Pluckhahn said Netcom's stock boost reflects the typical takeover premium and not its economic performance.
Lately, Netcom's stock could best be defined as schizophrenic.
In December 1996, the stock peaked at about $17 per share only to plummet to about $8 per share in March. It then climbed to $17 per share in June but collapsed again to about $11.75 per share late last month.
Netcom is yet another Internet-based firm that had much promise but failed to ever report a profitable quarter. In the quarter ended June 27, Netcom reported a loss of $9.1 million, or 79 cents per share, on sales of $41 million.
"But [Netcom] knows how to develop corporate intranets and how to manage them," Pluckhahn said. "That's something all telecommunication firms need and are willing to pay a premium for. The entire market has been heading in this direction for some time."
ICG, based in Englewood, Colo., provides telecommunications and local access services to business customers.