Via Net.Works Buys PSINet Europe

Via Net.Works enters agreement to acquire the continental European operations of PSINet Europe

August 17, 2004

3 Min Read

AMSTERDAM -- VIA NET.WORKS, Inc. (Nasdaq: VNWI; EASE) today announced that it has entered into definitive agreements with PSINet Europe BV, which is controlled by the Israel Corporation Limited (TASE: ILCO), under which VIA would acquire the continental Europe operations of PSINet Europe. The transaction, which is expected to close within 10 days, furthers progress in transforming VIA's business and its stated goals to:

  • increase the share of its revenues generated by hosting services

  • generate positive cash flows from its operation, and

  • only pursue transactions that are accretive and which have a beneficial impact on the company's cash usage

Scope of Transaction

In the transaction, VIA will acquire PSINet Europe operations in Belgium, France, Germany, the Netherlands and Switzerland. PSINet Europe's U.K. operations are not part of the acquisition, nor are its headquarters and central functions. The acquired parts of PSINet Europe provide managed hosting, managed networks and monitored access services to more than 4,000 customers on mainland Europe.

PSINet Europe, which was established as an independent subsidiary of PSINet Inc. in 1997, was acquired in 2002 by a consortium led by Israel Corporation. Since that acquisition, PSINet Europe has undergone significant restructuring and rationalization. The five country operations being acquired by VIA have annualized EBITDA-positive revenues of about euro 34 million (U.S. $42 million). VIA said it anticipates that the positive cash flows generated by the acquired operations, plus the expected cost savings to be achieved by the integration of the two groups, would "pay" for the transaction within about three years.

Under the terms of the deal, VIA will pay total consideration for the shares and inter-company debt of the PSINet Europe companies as follows:

  • euro 10 million in cash (approximately $12.2 million) at closing

  • euro 2 million (approximately $2.5 million), subject to adjustments

  • for any deficit in the agreed working capital balance, to be paid in the fourth quarter 2004

  • euro 6 million (approximately $7.4 million) in cash or, at the option of the sellers, 4.5 million shares of VIA common stock, 15 months after closing, subject to any final adjustments

Transaction Rationale

"This is the right deal, at the right time, for VIA," stated Rhett Williams, VIA's Chief Executive Officer. "On a pro forma basis and before synergies, the combined company will have revenues in excess of $110 million, fewer than 600 employees, gross margins in excess of 55% and a revenue mix of approximately 30% hosting, 55% access and 15% other managed services, such as VPNs and security. In addition, the acquisition will support our strategic objective of achieving profitability, as well as supporting the development of our Industry Solutions, VIA Express and Amen channels."

Michael McTighe, VIA's Chairman, stated that the acquisition represents a very important opportunity for VIA. "The combination of the two groups is a compelling transaction, both strategically and financially," he said. "The PSINet Europe operations to be acquired support and enhance VIA's business model and strategy, as well as our financial metrics, such as cash flow break- even."

"We are delighted to complete this transaction as it was clear to us throughout our discussions that VIA was the best partner for PSINet's mainland European business," stated Gilad Shivat, a principal in Israel Corporation and Chairman of PSINet Europe.

Via Net.Works Inc.

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