KPMG vies for pieces of Andersen

Impact of potential sale might be felt in Baltimore

May 09, 2002|By Andrea K. Walker | Andrea K. Walker,SUN STAFF

KPMG Consulting Inc. said yesterday that it has signed a letter of intent to acquire up to 23 independent consulting units from Andersen Worldwide for $284 million.

If McLean, Va.-based KPMG follows through with the transaction, it will issue up to 6.5 million shares of stock over three years to Andersen partners who join the firm.

The agreement was signed as a division of Andersen Worldwide, beleaguered Arthur Andersen LLP, sheds assets and lays off employees as it continues to defend itself against a federal criminal indictment for shredding Enron Corp.- related documents.

The deal announced yesterday would be limited to one unit of Andersen, Andersen Business Consulting, which provides consulting services to clients around the world.

The acquisition would include Andersen practices in Europe, Asia Pacific, Latin America and the United States. The consulting unit posted $1.4 billion in revenue in the last fiscal year.

The deal would affect up to 3,000 employees in the United States, including an undisclosed number in the Baltimore office, said Mary N. Hall, a spokeswoman for Andersen Business Consulting.

The other Baltimore divisions would remain intact unless another buyer put in a bid.

"If we were to go through with this, it would be the consulting office and nothing more," said John Schneidawind, a KPMG spokesman.

Each deal is subject to regulatory approval and to winning the backing of at least 90 percent of the local partners from each office. Officials with the Baltimore office didn't return phone calls yesterday.

KPMG officials said they hope to reach agreements with Andersen offices in 30 to 45 days and close on the deals in the summer.

Earlier, KPMG bought the consulting firms in Hong Kong and China.

One sticking point could be the legal liabilities Andersen could face from lawsuits filed against the company by Enron investors and creditors.

Rand Blazer, KPMG Consulting's chairman and chief executive officer, said in a conference call yesterday that the legal issues must be "solved to our satisfaction" before the acquisition is completed.

Several Andersen firms are in negotiations with other companies, and that, too, could delay KPMG's plans, officials said.

Both companies remained optimistic yesterday that the acquisition would be successful.

Analysts said Andersen has little choice but to sell off parts of the company as its chances of surviving its legal troubles diminish. The firm has been fired by 54 Standard & Poor's 500 index audit clients since its troubles began.

"The endgame seems to be to sell everything," said Robert Prentice, a professor of business law at the University of Texas. "They're trying to make sure their people still have jobs and to raise money to pay legal settlements."

The deal would provide KPMG, which split from KPMG LLP accounting firm last year, with a new talent pool and make it more competitive, analysts said. The number of employees would increase from 9,000 to 16,000.

KPMG stock closed yesterday at $17.27, up $2.22.

Bloomberg News contributed to this article.

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