Both companies, founded in 1989 and located in Burlington, Massachusetts, provide personalized news for individuals and businesses. Desktop Data delivers real-time news to enterprises through intranets, local area, and wide area networks, while Individual provides electronic, personalized business news to individuals through intranets, groupware, the Internet, and email.
Under the terms of the agreement, which was approved by both companies' boards of directors, shares of Desktop Data stock will be exchanged for Individual shares at a rate of one Desktop Data share for every two shares of Individual stock. The transaction values Individual shares at 5-11/64, based on Desktop's closing price of 10-11/32 Friday. Individual shares closed at 5-8/64 Friday.
The transaction will be accounted for as a pooling of interests and is structured to qualify as a tax-free reorganization. The merger is expected to be completed by the first quarter of 1998.
Both companies reported 35 percent growth during the past year. Together, the companies had $61 million in cash and other assets, and carried a debt of $2.5 million. The merged company will have a combined workforce of 436 employees.
Desktop Data founder and CEO Donald McLagan will serve as chairman, president, and CEO of the new company. Michael Kolowich, president, chairman, and CEO of Individual, will be named vice chairman of NewsEdge and will head the new company's transition team.
"Together, both companies will create a clear market leader at a time when the market is taking off and at a point when it is crying out for leadership," Kolowich said.
Both Kolowich and McLagan expect 1998 to be a year of investment and integration, with the combined company becoming profitable by the end of 1998.
"We will begin planning immediately the integration of the two organizations and product lines," McLagan said. "It will be a huge effort, but will result in a clear understanding of how we can use the strengths of our combined portfolios to best serve our customers."
Kolowich described the new company's development phases: "In the immediate phase, one of incorporation, we will identify things the two companies can do together. But the real task is to use the combination of capabilities to define the next-generation delivery platform."
"Once we develop a consistent look and feel for the unified platform, including deep customized news briefings along with breaking news updates, we have to make sure that we assure our customers of a migration path that takes them to the next-generation products," Kolowich added.
McLagan stressed that Individual's penetration in the end-user market meshes with Desktop Data's enterprise focus. "The ability to engage the individual with news is very important," he said. "The user is going to end up going to work and that's where the telemarketers will get them and encourage them to establish user groups. Once you have several user groups, the direct sales people come in and close the enterprise deal. Desktop Data lacked this end-user approach."