US internet service provider Concentric Network Corp has made a recommended offer of 146m pounds ($236.4m) for the UK’s largest carrier-independent ISP, Internet Technology Group Plc. The deal gives Concentric a handy footprint in Europe and positions ITG well to exploit the upcoming opening up of the UK’s digital subscriber line market.
The offer of 2.53 pounds per share represents a 62.1% premium over ITG’s middle market price on August 16, the day before rumors started circulating that the company was under offer. The offer has been made in cash and shares. For every 100 ITG shares, Concentric will issue 8.391 new shares and pay 117.50 pounds in cash.
Under the deal, ITG will also de-merge its only non-ISP interests, GlobalWave, which provides content delivery e-commerce software. Concentric will offer each ITG shareholder 0.17 pounds per share based on the proceeds to ITG from GlobalWave’s sale to a new entity Red Wave Ltd, a firm created by ITG chair Jan Murray.
Both parties describe the match as complementary given that both firms provide connectivity and hosting for business, with a little consumer/SME dialup on the side. Concentric’s focus in the States is digital subscriber lines, which ITG says it fully expects to become a priority for its new European operation given British Telecommunications Plc’s obligation to open up the local loop for ADSL in the UK next year.
Concentric also provides a portal site co-branded with Microsoft Corp’s MSN and some Microsoft application hosting services based on the NT operating system. In addition, Concentric provides the IP network for Microsoft’s WebTV service. Microsoft invested $50m in Concentric in June for convertible preferred stock, as well as receiving the option to purchase an additional 500,000 Concentric shares. An ITG spokesperson refused to speculate on whether future alliances between Microsoft and Concentric’s new UK arm were on the cards.
Concentric also is eager to get its hands on ITG’s burgeoning European network. The firm has a 25 year capacity lease on Viatel Inc’s Circe continental European ring.
