NextLink to acquire Concentric in $2.9 billion deal

NextLink and Concentric will combine their capabilities to provide a full range of voice, data and Internet communications services, the two companies said in a statement.

NextLink and Concentric compete against carriers such as Qwest Communications International, Level 3 Communications, PSINet and Verio, which are all aiming to offer services from Internet protocol-based telephony to e-commerce.

NextLink's strategy is representative of a larger trend for firms to become "integrated communications providers," or companies that can offer any type of telecommunications service to a wide range of customers, especially the largely untapped market of the small and medium-sized business customer.

Through the deal, NextLink and Concentric said they will have a competitive set of broadband network assets and complete data, e-commerce and Internet business services. In addition, Concentric's pending acquisition of London-based Internet Technology Group (ITG), which is expected to close in the company's first quarter, will give the combined company an established customer base in the European marketplace. ITG offers Internet access services within Europe.

NextLink chief executive Dan Akerson will remain CEO of the combined company. Concentric CEO Henry Nothhaft will become a vice chairman of the NextLink board and will head the combined company's retail Internet and data services businesses, which will continue to be offered under the Concentric brand name, the two companies said.

Headquarters for the combined company will be in McLean, Va. and Concentric's operations will remain in San Jose, Calif. Both companies said the total employee base will be approximately 4,000 after the deal closes.

Under terms of the deal, each share of Concentric stock will be exchanged for $45 of NextLink stock. However, the actual number of shares of NextLink common stock to be exchanged for each Concentric share will be based on the 20-day average trading prices of NextLink prior to the deal's closing.

The exchange ratio can not be less than 0.50 NextLink shares and can not be more than 0.65. If NextLink's average trading price exceeds $90.91, Concentric shareholders get 0.50 shares of NextLink stock for each of their Concentric shares. But if NextLink's average price is less than $69.23, Concentric shareholders get 0.65 shares of NextLink stock. Based on NextLink's closing price of $78.50 on Friday, the exchange ratio would be 0.57 NextLink shares for each Concentric share.

In other news, NextLink today announced the resignation of chief financial officer Mark Gunning, who joined the company last November. NextLink said Gunning will leave the company immediately for medical reasons. William Hoglund, chief financial officer at Eagle River Investments, which is a majority stakeholder of the company, will serve as interim CFO until a replacement is found for Gunning, the company said in a statement.

The Concentric deal, which has been unanimously approved by both the NextLink and Concentric boards of directors, is subject to approval by Concentric's stockholders. Eagle River Investments has agreed to approve the transaction, both companies said. The deal is subject to certain customary closing conditions and regulatory approvals and is expected to close in the second quarter of this year, the companies said.