SBC to buy Sterling Commerce for $3.9 billion

The news sent Sterling's stock soaring more than 38 percent. In early trading, shares of the company advanced $12 to $43.56. Meanwhile, shares of SBC fell $1.88, or 5 percent, to $36.38.

San Antonio, Texas-based SBC said its acquisition of the business-to-business software provider will help bolster its offerings by adding another Internet-based product to its set of telecommunications services. In return, Sterling said it will gain larger distribution and sales channels, including a chance to target small and medium-sized businesses.

Sterling, with annual revenues of $561 million, builds and manages secure online marketplaces where multiple buyers and sellers can conduct business, exchange goods and services, and share information in real time. The company says it serves more than 45,000 customers, including Fortune 500 companies such as Wal-Mart, Johnson & Johnson, Sony and BMW.

There has been a flurry of activity in the quickly expanding business-to-business e-commerce market, as a growing number of companies rush to the Internet to conduct business with their suppliers, partners and customers. Everyone from traditional software providers to telecommunications companies has jumped into the profitable industry, which analysts expect to surpass the trillion-dollar mark by 2003.

Under the terms of the deal, the all-cash transaction is structured as a $44.25-per-share cash tender offer followed by a merger with a subsidiary of SBC. The tender offer, which is expected to begin in the next several days, is valued at $3.9 billion, the companies said in a statement.

Sterling said it will operate as a separate subsidiary within SBC's global markets group and remain based in Columbus, Ohio. The company will work closely with SBC's business account teams to offer integrated products and services to customers. Rich Dietz, the current president of SBC's global markets group, will head the new subsidiary.

In addition, SBC said it plans to use Sterling's services to further streamline its own internal business needs and to help lower costs by bringing their suppliers, partners and customers online.

The deal, which is subject to certain closing conditions and regulatory approval, is slated to close in late March, the companies said.