Diamond Technology Partners Merges With European Company

Diamond Technology Partners is merging with European wireless and Internet-consulting company Cluster Consulting to create a new global e-consulting entity, the companies announced yesterday. The combined company will be known as DiamondCluster International Inc.

Diamond will pay $44 million in cash and an aggregate of 13.9 million shares and options for shares of its Class B common stock. The total value of the transaction is approximately $930 million. The companies expect the deal to be $0.02 accretive on an earnings-per-share basis in the fourth quarter of fiscal 2001, ending March 31.

The combined company employs more than 900 consultants, including nearly 100 partners worldwide. Diamond expects to receive approval and close the transaction during the calendar fourth quarter 2000.

"This move advances the company into the next generation of digital strategy and accelerates growth into Europe by at least two years," said Mel Bergstein, Diamond's chairman and CEO, in a statement. "DiamondCluster is the first digital strategy and solutions delivery firm with a strong global presence and world-class wireless and mobility expertise. Third-generation wireless technology will revolutionize how business is conducted and will be the prevailing technology for years to come on a global basis. This shared commitment to intellectual capital is a key scaling factor for our business."

Bergstein will become chairman and CEO of the new company, while Javier Rubio, CEO of Cluster, will become president for Europe and Latin America and a member of the board of directors.

"Cluster has a proven track record working with CEOs in Europe and Latin America to build their wireless businesses and, as a result, has been extremely profitable since its founding in 1993," Rubio says. "We are working with clients such as Ericsson, AltaVista, Orange, Sprint PCS, Telecom Italia Mobile, VodafoneAirtouch and Deutsche Telekom."

Rubio says the two companies' operating models, geography, skill sets, vertical industries and cultures are complementary, so he doesn't expect there to be any overlap in terms of markets and clients.

DiamondCluster's corporate headquarters will remain in Chicago, and the company will have offices in New York, Boston, San Francisco, London, Munich, D%FCsseldorf, Paris, Madrid, Barcelona, Lisbon and S%E3o Paulo.

Diamond Technology Partners' president Adam Gutstein will become president of the new entity, and will work closely with Ferran Soriano, vice president of corporate development for Cluster Consulting, in integrating the two companies. Mike Connolly, COO of Diamond, will become president for North America while Karl Bupp, CFO of Diamond, will become CFO of the combined company.

Gustein calls the merger, "a continuation of our firm's vision to be the world's leading digital-strategy firm" and says the move will be the springboard for future global expansion.

The transaction, which has been approved by Diamond's board of directors, will require shareholders' approval. Diamond is postponing its annual meeting of shareholders previously scheduled for Sept. 26 and will combine its regular annual meeting with a special meeting to be held during the calendar fourth quarter of 2000.

Diamond's stock was up by more than a point in early afternoon trading yesterday, selling for roughly $74 a share.