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Digital Island, Sandpiper merge in $630.5 million deal

Web hosting firm Digital Island and Sandpiper Networks, which helps publishers deliver content via the Net, agree to merge in a stock-for-stock deal valued at about $630.5 million.

Web hosting firm Digital Island and Sandpiper Networks, which helps publishers deliver content via the Net, today said they agreed to merge in a stock-for-stock deal valued at about $630.5 million.

The combined company will integrate content delivery, hosting, and network services, the two companies said. In addition, the new company will combine intellectual property from both companies, including Digital Island's TraceWare software and Sandpiper Networks' flagship Footprint content delivery products, which aim to ensure the delivery of updated Web content that is important to businesses.

Digital Island's chief executive Ruann Ernst will assume the CEO position in the combined company. Leo Spiegel, chief executive of Sandpiper Networks, will become president of the new company, the companies said. Sandpiper Network founders Dave Farber and Andrew Swart will assume the roles of chief scientist and vice president of software eEngineering, respectively.

The combined company will have a network of more than 100 customers, including E*Trade, Cisco Systems, and Microsoft, the two companies said.

The combined network will include more than 1,200 enterprise servers that directly serve 21 countries with a network of five regional data centers for Web-based marketing, sales, fulfillment, and applications, the companies said. Both have already adopted the same network plumbing, which includes Inktomi caching software, servers from Sun Microsystems, and Microsoft and RealNetworks software for streaming audio and video services, and Vignette for publishing and content management applications.

Under terms of the deal, Sandpiper's shareholders will receive 1.07 shares of Digital Island in exchange for each Sandpiper share, or a total of approximately 27.4 million shares of Digital Island. Based on Digital Island's closing price of 23 per share on Friday, the merger is valued at about $630.5 million.

The merger is subject to approval by shareholders of both companies, but those holding majority voting power for the two companies have already supported the transaction.

The combined company will be headquartered in San Francisco, where Digital Island is based. Sales offices, regional data centers, and other operations facilities will be located in eight countries, both companies said.