Malvern, PA, and Rockville, MD -- Verticalnet, Inc. (Nasdaq: VERT), a leading provider of Strategic Sourcing and Supply Management solutions, today announced that it completed a merger to acquire B2eMarkets Inc., a privately-held provider of Strategic Sourcing software solutions. The combined company, which as of today operates under the VerticalnetÆ name, brings together Verticalnet's top rated Spend Analysis and Advanced Sourcing solutions with B2eMarkets ' leading eSourcing suite including strategy formulation, negotiation management, contract management and compliance, and performance management software. Verticalnet also announced improved guidance for the quarter ended June 30, 2004.
" The combination of Verticalnet and B2eMarkets creates a true contender for leadership in the supply management market space, " said Nathanael V. Lentz, president and CEO of Verticalnet. " Verticalnet today has the scale and a compelling combination of best of breed applications, comprehensive services, and deep domain expertise to meet the evolving and increasingly sophisticated demands of Global 2000 companies. Today, more than ever before, our customers and prospects have access to a complete set of solutions to take their supply management initiatives to the next level. "
" Identifying and achieving maximum supply savings requires enterprises to improve visibility, alignment, and control of processes and data across the entire sourcing lifecycle, " said Tim Minahan, VP of Supply Chain Research at Aberdeen Group. " The combination of Verticalnet and B2eMarkets links together a broad supply management solution that addresses the complete supply management lifecycle - from initial spending analysis and strategy development through advanced sourcing decision support and compliance management. "
Transaction Details
The B2eMarkets transaction is effective as of today. In the merger transaction, Verticalnet issued 5,100,000 shares of common stock and delivered a promissory note in the principal amount of $5,925,603. The note accrues interest at the rate of 8% per annum; half of the principal amount is due and payable on July 16, 2007 and the remaining half is due and payable on July 16, 2008. The note is convertible into 2,949,204 shares of Verticalnet common stock, subject to approval by Verticalnet's shareholders. If the conversion feature of the note is approved by Verticalnet ' s shareholders, then either Verticalnet or the noteholders can require the conversion of the note into Verticalnet common stock.
In the near future, Verticalnet will file its proxy statement and thereafter hold its annual meeting, at which time the conversion feature of the previously described note will be submitted for shareholder approval. Failure to obtain shareholder approval will not result in any financial penalty to Verticalnet or any change to the terms of the note. Verticalnet's executives and members of the Board of Directors have agreed to vote their respective shares in favor of the conversion feature at the time of the shareholder vote.
The primary investors in B2eMarkets that have become Verticalnet shareholders include CIBC Capital Partners, Friedman Billings Ramsey, Syndicated Communications, Ascend Ventures, and Carthage Venture Partners. Verticalnet has agreed to register the shares issued in the merger and issuable upon conversion of the note, and is obligated to file a resale registration statement within 45 days after it holds its annual meeting of shareholders or sooner upon the exercise of piggyback registration rights.
Highlights
Benefits of this combination include:
* B2eMarkets brings proven " best of breed " competence in program management, eSourcing, contract management, and performance management capabilities, which combine with Verticalnet ' s existing capabilities to provide a comprehensive suite of supply management solutions.
* The combination of B2eMarkets and Verticalnet creates a company with increased scale from a financial, customer, and product standpoint. B2eMarkets generated approximately $8.1 million in revenues in the year ended December 31, 2003.
* A majority of B2eMarkets ' customers operated via an on-demand software model with long-term subscription agreements. The subscription model provides Verticalnet with a more balanced software and services revenue mix and enhanced visibility.
* With over 35 software customers with registered users on six continents using B2eMarkets ' solutions, Verticalnet has expanded its base of software customers. In addition, the combined company has more than 10 European customers in France, the United Kingdom, and Northern Europe.
* Having been partners for the past six months, the companies have worked closely together in go-to-market efforts and in joint product planning. Verticalnet and B2eMarkets have several common customers, have recently been jointly selected in multiple competitive sales processes, and are targeting their first integrated release for late summer.
" We see this merger as a natural progression of the partnership that we have had with Verticalnet, " added Orville A. Bailey, former CEO of B2eMarkets and EVP of Corporate Strategy and Business Development for the combined company. " I am excited to be a part of the Verticalnet leadership team and about what this merger means for our customers, employees, and investors. "
Integration
Verticalnet and B2eMarkets have initiated their integration plans, focusing on the sales, marketing, product development and administrative functions. Customer delivery organizations focused on product development, consulting services, software implementation, and customer support remain intact, ensuring that current Verticalnet and B2eMarkets customers enjoy consistent support, while benefiting from an enhanced set of choices going forward.
The integrated company will retain the leadership teams of both companies. Nathanael V. Lentz will remain president and CEO of Verticalnet. Orville A. Bailey, formerly president and CEO of B2eMarkets, will be the Company ' s Executive Vice President of Corporate Strategy and Business Development, with responsibility for product strategy, business development, marketing, and channels. Gene S. Godick will remain Verticalnet ' s Executive Vice President and Chief Financial Officer. Brent W. Habig will remain Executive Vice President of Sales and Consulting of the combined company. Lucas P. Schneider, formerly of B2eMarkets, will serve as SVP of Operations with responsibility for development and customer support. Other members of both executive teams will provide key leadership roles throughout the company.
" Orville Bailey is a recognized thought leader in the supply management space and the addition of him and his high quality team is one of the benefits of this transaction. Working with this team, I believe that integration will be as seamless as our integration of Tigris Corp., where the results have exceeded our expectations, " Lentz added. " As with the Tigris merger, we will remain focused on the true sources of value creation - customers, people, and innovation. "
The combined company will continue with all existing product and client deliveries as planned. B2eMarkets ' and Verticalnet ' s products will continue to be supported and enhanced and terms and conditions of professional services and product support agreements are unchanged and remain in effect.
