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MarchFirst may sell some assets

A buyer is to acquire at least some of the assets of the struggling Net consultancy, and according to sources close to the deal, an agreement is expected soon.

A buyer has stepped up to acquire at least some of the assets of struggling Net consultancy MarchFirst, with an agreement expected Friday, according to sources close to the deal.

Divine, an Internet holding company formerly known as Divine interVentures, was close to finalizing an offer late Thursday, sources said. Rumors have circulated during the past week that a deal was being worked out by the companies, both of which are based in Chicago.

Divine's chief executive Andrew "Flip" Filipowski declined to comment. A MarchFirst representative could not immediately be reached.

The promise of an offer comes as MarchFirst lays off workers and tries to revive its stock price, which dipped to 16 cents before the Nasdaq halted trading in the shares Wednesday pending additional information about the company's condition.

MarchFirst executives informed employees Thursday of mass layoffs, sources told CNET, although exact numbers were not immediately clear. In a news report Tuesday, The New York Times said the company would slash 3,000 jobs, or about half of its work force.

A deal between Divine and MarchFirst is imminent, according to an internal e-mail sent to a select group of MarchFirst employees late Wednesday and obtained by CNET Some of MarchFirst assets "have found a buyer and the deal is all but complete," the message read.

Financial terms were not disclosed.

The e-mail said that the deal calls for Divine to buy a number of MarchFirst assets, including application service provider HostOne. The new company would be a wholly owned and independently operated subsidiary of Divine.

"The transaction will create a new company comprised of the MarchFirst Central Group offices and a small number of other offices," the e-mail said.

The e-mail said the outlook was "not so bright" for those MarchFirst assets not included in the sale.

"MarchFirst will be closing a number of offices and releasing approximately 2,000 people" on Thursday, the e-mail said.

The email also noted that parts of the business that don't get sold will be closed over time, and the MarchFirst parent company "will ultimately be folded." The company does not expect to file bankruptcy in the "immediate future," but did not rule it out altogether, according to the email memo.

Web consulting companies have been hit hard by the belt-tightening at companies they service. MarchFirst has been faced with the challenges of shifting its business to fit the sudden changes in spending from clients that need services such as Web development and help with their online strategies.

The company found itself short of cash and battling executive departures. On March 12, the company announced the resignations of Chief Executive Robert Bernard, Chief Operating Officer Thomas Metz and Executive Vice President Joseph Bong.

For Divine, which slashed 42 percent of its work force last November, a deal to buy MarchFirst comes at a curious time, as most venture capital firms trim their portfolios rather than add to them.

Reporter Melanie Austria Farmer contributed to this story.