AppNet OKs sale to Commerce One

$1.4 billion deal is set day after premature notice elicited denial


June 21, 2000|By Amanda J. Crawford | Amanda J. Crawford,SUN STAFF

Commerce One Inc. of Pleasanton, Calif., announced yesterday that it reached a definitive agreement to acquire AppNet Inc. of Bethesda in a stock purchase worth about $1.4 billion.

The agreement came one day after Commerce One inadvertently released and then retracted an announcement about the deal. Officials from both companies said the mistake, which Commerce One attributed to "someone in the U.K." hastened the closing of the deal.

Under the agreement, each share of AppNet will be traded for 0.8 of a Commerce One share. Commerce One, which makes software to process Internet purchases, will also acquire all outstanding stock options and assume an undisclosed amount of debt from AppNet.

The company expects the deal, which is subject to shareholder and regulatory approval, to close in 75 to 90 days.

"We did a very extensive look at services companies and we felt [AppNet] met almost every criterion we had," said Chuck Donchess, executive vice president and chief strategy officer for Commerce One. "It had the right size, a very deep talent pool and a very strong management team."

Donchess said the acquisition of AppNet, which provides Internet consulting and services, will help Commerce One significantly expand its offerings to clients, adding about 1,000 consultants to its pool of about 250.

"We think it is going to be a great benefit to our employees, our customers and our shareholders," AppNet spokesman John Berry said.

The combined company, which will have more than 2,300 employees and 44 offices in 18 countries, will be the "first fully integrated e-commerce applications and Internet professional services company on the market," Berry said.

Donchess said Commerce One does not anticipate laying off any of AppNet's employees or closing any AppNet offices. Berry said that includes offices under construction in Columbia, where the company's Laurel delivery services will be relocated.

Most AppNet employees will be folded into Commerce One's Professional Services Division, which will be headed by Ken Bajaj, AppNet's chairman and chief executive officer, Donchess said.

Edward S. Caso, managing director and senior technical services analyst for First Union Securities Inc. in Baltimore, said the complexity of the software Commerce One provides requires the capabilities of a service company, like AppNet. The two companies entered into a partnership in April.

The effect of the merger is to increase "the percentage of their business that is implemented by their own people," Caso said.

Donchess said the acquisition will also help speed Commerce One to profitability. Previously, the company had said it expected to reach profitability by the fourth quarter of 2001. With AppNet's "healthy revenue" and profitability, he said, the company has advanced that prediction to the third quarter of 2001.

Monday's announcement caused Commerce One to "put procedures in place to ensure that can't happen again," including an approval process before information about the company is disseminated, Donchess said.

He attributed the mistake to someone in Europe who inadvertently released a news release before the deal had closed. He said the company is focusing on the merger and not investing time in finding the person at fault.

AppNet employs about 1,200, about 250 of which are in Maryland.

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