The deal would help bring PSINet, which has been rapidly expanding worldwide, closer to its goal of becoming a global business ISP with the ability to provide both access and e-commerce services.
The boards of directors of both companies have approved the deal, which calls for PSINet to pay $45.28 a share in cash and stock--about $351 million in cash and up to 7.8 million PSINet common shares. Each Transaction Network share will be converted to half a PSINet share plus $22.50 in cash, a spokesman for PSINet said.
The deal, which is likely to close by the end of the year, is expected to be immediately accretive to PSINet's earnings before interest, taxes, depreciation, and amortization (EBITDA) and earnings per share measures, the company said.
Transaction Network is a leader in processing transactions over the Internet and has experienced a 20 percent growth rate per month in transaction volumes in 1999, according to the company.
"This transaction represents the first combination of a market-leading e-commerce enterprise with a global facilities-based Internet service provider," said PSINet chief executive William Schrader.
Transaction Network has operations in Ireland, the United Kingdom, Sweden, France, Australia, and Japan and is expanding its business worldwide. The companies hope the acquisition will allow Transaction Network to expand its international reach of services while operating over PSINet's global backbone.
PSINet was one of the first ISPs and is now one of the largest independent facilities-based commercial ISPs.
Transaction Network, headquartered in Reston, Virginia, operates a data transport network used by credit card processors in the United States to carry account and purchase information between merchants' and processors' data centers for authorization. The company said it processes more than 20 million transactions per day from 2 million businesses and handles more than 70 percent of the electronic point of sale transactions in the United States.
During its quarter ended June 30, 1999, Transaction Network reported revenue of $42.7 million, EBITDA of $10.50, and a net profit of $3.1 million.
Completion of the transaction is subject to a number of conditions, including receipt of Transaction Network shareholder approval and regulatory approvals.