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PSINet buys Metamor

Internet services provider PSINet Inc. (Nasdaq: PSIX) said on Wednesday it would buy business software and service company Metamor Worldwide Inc. (Nasdaq: MMWW) for $1.9 billion in stock. It will also assume control of Metamor's electronic commerce software affiliate Xpedior Inc. (Nasdaq: XPDR).

PSINet provides Internet access and related services to businesses and government agencies, as ISPs. It also has a worldwide fiber-optic network serving 22 countries and provides services such as Web hosting and satellite facility operations.

Wednesday's deal is expected to improve PSINet's stance in the electronic commerce business. Amid tough competition and consolidation among Internet access providers, it isn't the first carrier to look for a bit of B2B to round-out its offerings.

SBC Communications' (NYSE: SBC) purchase of Sterling Commerce (NYSE: SE) for $3.9 billion marked a telecom provider's first large acquisition outside traditional communications markets. SBC acquired the electronic business specialist in order to provide an e-commerce infrastructure for its data.

Under terms of the deal, Metamore shareholders would get 0.9 PSINet share for each Metamor share -- worth nearly three times Metamor's $16 per share closing price on Tuesday and a 7 percent premium over its 52-week high of 41 5/8. PSINet closed Tuesday at 49 1/2.

PSINet said an alliance and strategic investment with Xpedior (Nasdaq: XPDR), a B2B services company was also part of the deal. Under the terms of the deal, PSINet plans to invest $50 million in Xpedior stock that will have an initial conversion rate of $37.50 per share.

"E-Commerce is an important component of our Internet Super Carrier strategy,'' said PSINet chairman and CEO William Schrader in a press release. "The acquisition ... furthers our plans to move into the applications outsourcing arena," he added.

The deal, expected to close by the middle of this year, should add to PSINet's earnings before interest, taxes, depreciation and amortization (EBITDA), the company said.

PSINet's competitors include Internet-access provider Concentric Network (Nasadaq: CNCX), which telecommunications provider Nextlink (Nasdaq: NXLK) has agreed to buy; GTE (NYSE: GTE) which has is being acquired by Bell Atlantic (NYSE: BEL), and MCI WorldCom (Nasdaq: WCOM), whose UUNET unit offers Internet access to businesses.