Under the deal, professional services firms USWeb/CKS and Whittman-Hart will combine their strategies to focus mainly on Internet projects, including helping companies from "dot-com" start-ups to Fortune 500 giants with their Internet business models, the companies said in a statement.
The deal sent both companies' stock sliding. Shares of Whittman-Hart plummeted 29 percent to 56.25 in early afternoon trading, while USWeb/CKS dropped nearly 12 percent to 44.94.
The companies said they will merge in a stock swap in which each outstanding share of San Francisco-based USWeb/CKS will be exchanged for 0.865 shares of Whittman-Hart stock. Following the merger, USWeb/CKS shareholders will own approximately 57 percent of the combined company and Whittman-Hart shareholders will own about 43 percent, the companies said. Based on Whittman-Hart's closing price on Friday of 79.25 and the exchange ratio, the combined company will have a market capitalization of approximately $14 billion on a fully diluted basis.
USWeb and Whittman-Hart were not immediately available for comment.
Both companies compete in the growing services market against EDS, CSC, Andersen Consulting, PricewaterhouseCoopers and other smaller, boutique firms such as Razorfish, Viant, Scient and Proxicom. The industry has seen a shift in business focus to more lucrative Internet-driven projects and consulting deals as more companies make the transition to the Web.
Following the merger, Whittman-Hart chief executive Robert Bernard will be chief executive and president of the new company while USWeb's chief executive Robert Shaw will take the role of chairman of the board, the companies said. Whittman-Hart chief financial officer Bert Young and USWeb/CKS chief operating officer Robert Clarkson will be chief financial officer and chief operating officer, respectively. The nine-person board of directors will include four directors from USWeb/CKS, four from Whittman-Hart, and one additional person to be selected. The new company's corporate headquarters will be in Chicago, with executive offices in San Francisco, the companies said.
Together, the companies said they will tackle client relationships by continuing to manage them locally; marketing and creative services by providing them jointly in major markets; and strategy services, including digital business strategy and Internet services, by delivering them from a pool of consultants with specific market space expertise.
USWeb/CKS and Whittman-Hart said they plan to continue to develop and offer managed services and application hosting services, which was a strong portion of USWeb's business focus.
The deal is subject to customary closing conditions, including approval of the stockholders of both companies and regulatory review. The merger is expected to be completed by April of 2000, the companies said.