In an embarrassing goof, Commerce One Inc. announced yesterday that it was buying AppNet Inc. of Bethesda for $1.38 billion in stock. The companies later said the announcement wasn't true - at least not yet.
Trading of both companies was halted on the Nasdaq stock exchange yesterday morning after Commerce One's announcement of the deal. AppNet issued a denial and Commerce later retracted its statement.
Commerce One in its initial announcement had included quotes praising the merger from Ken Bajaj, AppNet's chairman and chief executive.
"Yes, we are in discussions, but we don't have any sense of timing," said Alla Iaquinto, director of corporate communications for AppNet. "No definitive agreement has been reached at this time."
In its statement, AppNet, an Internet consulting and services company, warned that "significant issues remain unresolved," adding: "There can be no assurances that any such combination may occur."
Commerce One, based in Pleasanton, Calif., declined to explain how the mistake was made.
Trading of the companies' stocks resumed just before noon yesterday.
"I would guess we'll know in a day or two whether a transaction is really going to go through or not," said William Loomis, an analyst with Legg Mason Wood Walker in Baltimore.
He said the deal's chances are still "better than 50 percent, but, given what has happened so far, I think that decreases the chances of a deal."
Yesterday's fiasco probably caused "friction" between the companies as they are trying to reach an agreement, he said.
Stephen Dube, an analyst with Wasserstein Perella Securities Inc., said the mix-up probably confused shareholders.
"I've never seen anything like this happen and I've been doing this for a while," he said. "I'm sure whoever was responsible for it has been chewed out."
In its retracted statement, Commerce One said that under the agreement each share of App- Net would be exchanged for 0.8 of a Commerce One share.
The company, which makes software to process Internet purchases, said acquiring AppNet would give it the ability to offer consulting services to its clients as well.
"I think that with AppNet, the way business is tracking, shareholders could get a higher value by them continuing to run the business," said Legg Mason's Loomis. "I don't think they need Commerce One to grow. "
AppNet employs about 1,200 in 20 offices nationwide. A third of the company's employees are in Maryland and Virginia.
Shares of AppNet fell $4.5625 yesterday to close at $34.50. Commerce One shares closed at $51.4375, up 68.75 cents.