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Wang uploads Olivetti unit
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March 2, 1998: 8:54 a.m. ET
$390M Olsy purchase spawns computer services giant in Asia and Europe
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NEW YORK (CNNfn) - Wang Laboratories Inc. has agreed to acquire Olivetti SpA's computer-services unit in a $390 million deal that will nearly triple Wang's revenue and vault it into contention with a coterie of the world's largest service providers across Europe and Asia.
Wang's purchase of Olsy -- a wholly owned subsidiary of Olivetti specializing in information technology - will spawn a computer-networking titan able to compete more effectively with such global standard-bearers of the computer services industry as International Business Machines Corp., Electronic Data Systems Corp., and Hewlett Packard Corp.
The combined business will reap more than $3.6 billion in annual revenue, up from Wang's current $1.3 billion, and have 20,000 employees worldwide. At that level, it will rank as one of the world's largest providers of integrated network solutions and desktop technology services.
But perhaps more significantly, the merger will enhance Wang's ability to go head-to-head with its rivals in European and Asian markets that have been its Achilles' heel in the past. Nearly three-quarters of Wang's 12,000 employees are Europe-based, versus only 1,500 in Asia. The merger with Olsy will double the Asian number overnight.
The new worldwide business will operate as a new company, to be called Wang Global. The deal is expected to close by the end of March.
Under the terms of the cash-and-stock deal, Wang will pay Olivetti $70 million for Olsy upon closing, plus as much as $56 million in 2000, provided Wang Global exceeds pre-set growth targets. Wang also will issue 8.75 million common shares to Olivetti, at a Feb. 27 closing price $27.875 per share, giving Olivetti a 17 percent stake in the company.
Olivetti thus will become Wang's largest single shareholder, topping Microsoft's 10 percent stake.
Joseph Tucci, Wang's chairman and chief executive officer, said the merger will enable Wang to leverage "already strong partnerships" with Microsoft and Cisco Systems Inc. to improve its services.
"Our highly skilled employees and sophisticated technology-based delivery systems will allow us to provide customers in new markets the level of IT service they critically need," Tucci said.
Wang said it also is negotiating with its bank group to expand existing lines of credit from $225 million to $500 million to help develop the combined company.
For Wang, the merger consummates the company's breakout into the brave new world of technology services. Before going into bankruptcy-law reorganization in 1988, Wang fashioned itself into a mini-computer maker. Since emerging from that reorganization in 1993, it has sought to jettison its old image and branch out into services and consulting, which have recently emerged as the golden chalice of the computer business.
Based in Billerica, Mass., Wang provides an extensive range of architecture, design and installation services for large multinational corporations and governments. It has affiliates in about 130 countries.
Olsy develops and implements technology solutions for large public and private corporate customers, largely in banking, utilities and retail. Olsy employs 12,000 people in more than 40 countries.
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