Siemens AG looked at 120 service companies before deciding that Entex Information Services Inc. was the best fit.
Siemens, Berlin, agreed to buy Entex last week for $105 million in cash, minus certain deductions to be finalized later.
"Entex offered a strong U.S. service presence," said John Loveland, executive vice president, international, at Siemens IT Service, a Siemens subsidiary.
"[Its] service offerings complement Siemens' current international offerings [with] high-caliber customer service levels, product independence, strong partnerships with major vendors and enhanced global service offerings," Loveland said.
| The Merger |
"We underestimated the impact of the lockdown from Y2K migration projects and the erosion of the lower-end service base," said John McKenna, Entex chief executive, who will assume the same position with the new entity,Entex IT Service, a Siemens company.
With the merger, Entex now will have more financial resources and Siemens will have a stronger U.S. presence, said analysts. "By 2005, we [hope to] be recognized as a market-driven, globally significant managed services provider, growing consistently faster than the market," said Paul Stodden, president and chief executive at Siemens IT Services.
Stodden's goal is to grow Entex IT Service into one of the top five companies in the information services market in the United States and internationally.
Siemens IT Service Group in North America will be merged with Entex by June 30, at which time the combined operations will have worldwide revenue of nearly $2.2 billion and about 13,000 employees providing service in more than 100 countries. In North America, the new entity will generate $550 million in annual revenue with 5,100 employees in 50 offices, said executives.
The deal was a $300 million enterprise purchase for Siemens because it included the assumption of Entex's debts, the companies said. The deductions to be finalized later include the amount by which Entex's current assets, less total liabilities at the measurement date, are less than Entex's current assets less total liabilities at Sept. 26, 1999; Entex's legal and advisory expenses for the deal, severance and compensation costs; and an amount equal to $32.2-
million, less the book value of Entex's subordinated debentures of the measurement date. It is estimated that this deduction will be approximately $12 million.
Entex estimates that the purchase price per share will be between $1.20 and $1.50 but that it may be significantly less. Entex shares are not traded publicly.
Like many of its peers, Entex has been trying to recast itself as a services integrator. Last May, the company sold its product business to CompuCom Systems Inc. to concentrate on outsourcing and consulting as a services-only company.
The key now is for Entex to focus on maintaining its customer relationships, said Marilyn Truglio-Kirwin, senior research analyst at Gartner Group, San Jose, Calif.
McKenna met with a half-dozen of Entex's largest customers in the 24 hours after the announcement of the sale.
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