SBC Communications Inc. (NYSE: SBC) said Tuesday it will buy Sterling Commerce (NYSE: SE) in a cash deal valued at $3.9 billion. The move puts SBC in the hot business-to-business e-commerce market.
SBC, a local telephone giant, said it would offer $44.25 cash per share of Sterling Commerce, an electronic-commerce software provider. Shares of Sterling Commerce closed at 31 9/16 Friday. The tender offer should start in the next several days and is expected to close in March or during the second quarter, the company said.
Sterling Commerce, based in Columbus, Ohio, used to be a unit of Sterling Software (NYSE: SSW), which was acquired by Computer Associates (NYSE: CA) just last week. Sterling Commerce, which competes with CheckFree (Nasdaq: CKFR), Harbinger (Nasdaq: HRBC) and Elcom International (Nasdaq: ELCO), was spun off as an independent entity in March 1996. Sterling Commerce and Sterling Software are no longer affiliated.
Sterling Commerce will operate as a separate subsidiary within SBC's Global Markets group, SBC said. Sterling will remain in Columbus, Ohio. Sterling Commerce has become a Wall Street favorite of late, following strong earnings and a round of analyst upgrades.
The acquisition of Sterling Commerce also comes at an interesting time for SBC. Last week, the U.S. Justice Department said it opposes SBC's effort to crack the $6 billion market in Texas and become the second "Baby Bell" to offer long-distance service to its local customers. SBC, Bell Atlantic (NYSE: BEL) and BellSouth (NYSE: BLS) have been diversifying to compete with the likes of MCI WorldCom (Nasdaq: WCOM) and AT&T (NYSE: T).
In a statement, SBC said the acquisition of Sterling Commerce builds on a series of strategic initiatives, alliances and investments to provide its customers with end-to-end data and Internet-driven products and services. The company added that it plans to use Sterling Commerce's knowledge to bundle more products and services for business customers.
Sterling Commerce specializes in "e-Marketplace communities" where multiple buyers and sellers can conduct transactions.
"This is an outstanding addition to our already strong line-up of data services, enhancing our ability to offer our business customers integrated, end-to-end e-business solutions worldwide," said Edward Whitacre, SBC's chief executive officer, in a statement. "This instantly gives SBC the skill sets, software, products and services needed to take the lead in one of the most rapidly growing segments of the e-commerce market."
The companies said Sterling Commerce would leverage SBC's customer base and initiatives such as Project Pronto, a $6 billion broadband network investment. SBC said business-to-business e-commerce is a strong fit as the company rolls out its high-speed Internet access. SBC will also use Sterling Commerce's software to become more efficient.
In early February, SBC and Mexican telecommunications powerhouse Telefonos de Mexico (Telmex) (NYSE: TMX) said they would invest $150 million in high-speed Internet access provider Network Access Solutions (Nasdaq: NASC).