|
Wit Cap buys SoundView
|
 |
November 1, 1999: 1:58 p.m. ET
Online investment bank paying $320M for tech-focused private firm
|
NEW YORK (CNNfn) - Fledgling online investment bank Wit Capital agreed Monday to buy high-tech investment firm SoundView Technology Group for about $320 million in stock and options, expanding its underwriting business in Internet companies and boosting revenue.
New York-based Wit Capital (WITC), which went public in June and is 20 percent owned by Goldman Sachs Group Inc. (GS), bills itself as a populist brokerage house that helps individual investors buy into highly sought after initial public offerings.
The company said the addition of privately held SoundView, which focuses on institutional investors and deals solely in technology and Internet companies, will give investors access to more shares from a broader selection of stocks, boost its online investment research and expand investment banking.
SoundView, an employee-owned investment bank spun off from the Gartner Group (IT) in 1985, also is turning profits, unlike its three-year-old buyer. Wit Capital said the acquisition puts it in a better position to become profitable sooner than planned, but that the company will continue to spend money as it concentrates on growth.
"The objective at this point for the combined entity is to continue to build a world-class franchise, so my expectation is that will be our first priority over the next 12 months," Wit Capital co-CEO Ron Readmond said in a conference call announcing the deal.
The deal increases nine-month revenue to a combined $127 million, up from $27 million for Wit Capital alone.
Investors reacted favorably to the deal, catapulting Wit Capital stock up as much as 30 percent. The stock traded up 3-7/8 to 21-7/16 Monday afternoon, down from a high of 24-3/4 earlier in the day.
"I thought this was brilliant," analyst Gail Bronson of IPO Monitor said of the deal. For Wit Capital, "it brings them more stature in trying to jockey for position in deals."
Wit Capital was one of the first investment banks to give individual traders the opportunity to participate in IPOs over the Internet.
"They're clearly the market leader," Bronson said.
Under the deal, Wit Capital Group Inc., the parent of the Wit Capital Corp. investment banking arm, will acquire all of SoundView's outstanding shares for newly issued Wit Capital common shares and options. Based on Wit Capital's closing stock price of $17.56 Friday, the deal is worth about $320 million.
The exact exchange ratio will depend on Wit Capital's trading price prior to the deal's close, based on a trading range between $15.56 and $18.56 per share.
The boards of both companies have approved the deal, which is expected to close in January pending shareholder and regulatory approval.
SoundView President and CEO Russell Crabs would take a seat on Wit Capital's board, while SoundView chief operating officer Curt Snyder would become chief financial officer of the new company.
Wit Capital recently has been expanding its reach overseas. Last week, the company announced plans to create a European investment bank with enba Plc, a privately held online financial services company based in Dublin, Ireland. Wit will take a 12 percent stake in the firm worth about $30 million.
In August, Wit Capital set up an online investment bank joint venture in Japan.
The new company will be based in New York, with the Connecticut office of SoundView and the San Francisco offices of both firms remaining.
|
|
|
|
|
 |
|
