NEXTLINK Communications to purchase Concentric Network for 22.88 times revenue

Weekly Corporate Growth Report, Jan 17, 2000

The Deal: NEXTLINK Communications, Inc. has announced that it would purchase the Concentric Network Corporation, an Internet-access provider, for nearly $2 billion in stock. According to the terms of the transaction, Concentric shareholders will receive $45 in NEXTLINK stock for each share. Shares of Concentric rose $9.625, to close at $39.625, while NEXTLINK fell $1.4375, to $77.0625, after the news of the acquisition was announced.

Discussion: Concentric Network provides a well-rounded portfolio of Internet networking services. Concentric provides high-speed dedicated digital subscriber line (DSL) Internet access, e-commerce and Web hosting services for small and medium-sized businesses, as well as virtual private networks for larger enterprises, using an ATM- and frame relay-based network. Concentric's partners include Nortel, SBC Communications and Teligent. Concentric has won some large customers, including AT&T, Bloomberg, and Microsoft's WebTV.

NEXTLINK Communications is a competitive localexchange carrier which builds fiber-optic rings in cities to provide local and long-distance phone service. NEXTLINK provides services in 38 major U.S. markets, including New York City, Los Angeles and Chicago, in 14 states.

NEXTLINK is also adding local multipoint distribution service fixed-wireless licenses to its holdings. NEX-MINK was founded by cellular phone industry pioneer Craig McCaw, who owns 35% of the company and controls nearly 60% of its voting stock.