SUNNYVALE, Calif. and PITTSBURGH, Penn. - January 23, 2004
Under the terms of the definitive agreement, stockholders of FreeMarkets will receive 2.25 Ariba common shares and $2.00 in cash for each outstanding FreeMarkets common share. Based on the closing price of Ariba common stock on January 22, 2004, the transaction is valued at approximately $493 million.
The combined company would have approximately $360 million in annualized revenue and fees as of December 31, 2003. Ariba's broad suite of enterprise spend management software and services will complement FreeMarkets services-based sourcing and global supply management expertise. Ariba customers will benefit from richer sourcing services and supply management knowledge while FreeMarkets customers will benefit from a broader portfolio of solutions, both in sourcing and across the ESM spectrum.
"It's no secret that many of the world's leading companies have already turned to Ariba and FreeMarkets to save money," said Bob Calderoni, president and CEO, Ariba. "This deal brings together two leading companies focused on providing customers with innovative ways to impact their bottom lines. I am excited by what this means for our customers, our stockholders, and our employees. The complementary strengths of Ariba and FreeMarkets will help accelerate this market and set the standard for spend management solutions for years to come."
The integrated company will retain the Ariba name and combine the leadership teams of both companies. Upon completion of the acquisition, the company will be led by Calderoni, who will retain his roles as CEO and Chairman of the Board.
FreeMarkets President and CEO Dave McCormick will become President of Ariba and will also join Ariba's Board of Directors. FreeMarkets board member Karl Newkirk will also join Ariba's board. The company headquarters will remain in Sunnyvale, California, but the company will also maintain a significant presence in Pittsburgh.
"I'm looking forward to working with Bob, the Board of Directors, and our entire executive team as we move forward," said McCormick. "By combining our unique domain knowledge and expertise in sourcing and supply management with Ariba's strong spend management capabilities, we can provide companies with a truly comprehensive set of software and services that will enable them to drive greater savings and efficiencies across their operations."
Both Ariba and FreeMarkets will proceed with all committed product deliveries as planned, with both companies' applications merging to a single platform over time and combining the best functionality of each company's solutions. Ariba and FreeMarkets will also continue to deliver services, support and consulting offerings on both platforms until the technologies converge.
The combination is expected to be accretive to Ariba's earnings immediately following closing, on an adjusted basis excluding transaction-related charges, restructuring costs, and amortization associated with acquired intangibles and other purchase accounting adjustments. The merged companies also expect to obtain improved operating efficiencies of approximately $25 million on an annualized basis within nine months after closing.
Upon completion of the transaction, current FreeMarkets stockholders will own approximately 28% of the outstanding capital stock of the combined company. The stock portion of the consideration to be received by FreeMarkets stockholders is expected to be tax-free to such stockholders. The Boards of Directors of both FreeMarkets and Ariba have unanimously approved the agreement, and the directors and executive officers of the companies have entered into agreements to vote the shares they own of their respective companies in favor of the transaction.
The transaction is subject to customary closing conditions, including regulatory review and approval by the stockholders of each company, and is expected to close in the mid-to-late second calendar quarter of this year. Morgan Stanley & Co. Incorporated acted as exclusive financial advisor to Ariba and also provided a fairness opinion. Goldman, Sachs & Co., acted as exclusive financial advisor to FreeMarkets and also provided a fairness opinion.
Separately, Ariba will seek stockholder approval to consummate a 1-for-5 or 1-for-6 reverse stock split, which if consummated would take place at the time of completion of the merger.
For more information about Ariba and FreeMarkets joining forces, visit: http://www.ariba.com/announcement.
Preliminary Financial Results -- Ariba
Ariba expects total revenues for its fiscal Q1 2004 (ended December 31, 2003) to be approximately $52 - 53 million and license revenue to be approximately $18 - 19 million. Net income for the December quarter is expected to be approximately $6 million, or $0.02 per share, including certain one-time cost benefits of approximately $5 million.
Ariba management's previous guidance for Fiscal Q1 2004 provided on October 22, 2003 was for total revenues of $51 - 55 million, license revenues of $16 - 19 million, and net income (loss) of ($0.01) to $0.01 per share.
Ariba will host a conference call on Wednesday, January 28 at 2:00 p.m. PST/5:00 p.m. EST to discuss the complete financial results for the first quarter of fiscal year 2004. A news release with the company's financial results will be available after the close of the market on the same day.
Preliminary Financial Results -- FreeMarkets
FreeMarkets expects total revenues and fees for the December 2003 quarter to be $37-38 million and expects revenues for the December 2003 quarter to be $33-34 million. Operational earnings for the December 2003 quarter are expected to be $0.04 - $0.05 per share and net loss on a GAAP basis for the December 2003 quarter is expected to be ($0.19) to ($0.20).
Previous management guidance for the December 2003 quarter called for total revenues and fees of $37-39 million and operational earnings per share of $0.04 to $0.05.
FreeMarkets will provide a news release of its complete financial results on Monday, February 2, 2004.
About Enterprise Spend Management
Enterprise Spend Management (ESM) is a category of software and service offerings designed to provide companies with the means to manage enterprise-wide spending within a closed-loop process. ESM incorporates various sub-categories of solutions, including sourcing, procurement, contract management, spend analysis, and invoicing. ESM solutions interface with multiple back-end ERP systems and work together across an entire enterprise to deliver demonstrable bottom-line results. ESM helps an organization build a core competency in managing spend.
About Ariba, Inc.
Ariba, Inc. is a leading Enterprise Spend Management (ESM) solutions provider. Ariba helps companies develop and leverage spend management as a core competency to drive significant bottom line results. Ariba Spend Management software and services allow companies to align their organizations with a spend-centric focus and deploy closed-loop processes for increased efficiencies and sustainable savings. Ariba can be contacted in the U.S. at 1.650.390.1000 or at
About FreeMarkets, Inc.
FreeMarkets is a leader in providing companies with software, services, and information for Global Supply Management (GSM). FreeMarkets' GSM solutions help companies to lower costs, reduce risks, and increase profitability by improving their supply management processes and expanding the reach and capabilities of their supply management organizations. FreeMarkets can be found on the Web at