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ICG taps RightWorks
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March 8, 2000: 4:05 p.m. ET
Company takes a majority stake in B2B software firm; eyes IPO this year
By Staff Writer Richard Richtmyer
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NEW YORK (CNNfn) - Internet Capital Group on Wednesday said it would buy a majority stake in RightWorks, a privately held software company that specializes in business-to-business electronic commerce.
ICG (ICGE: Research, Estimates), a Wayne, Penn.-based holding company that focuses on B2B Web companies, said it would pay $22 million in cash and roughly $635 million, or 4.5 million shares, of ICG stock.
RightWorks, which was founded in 1996 and has its headquarters in San Jose, Calif., makes the software that powers B2B exchanges.
RightWorks lists companies such as Aspect Development (ASDV: Research, Estimates), ShopNow.com (SPNW: Research, Estimates), Trade Matrix.com, VerticalNet (VERT: Research, Estimates) and Wells Fargo (WFC: Research, Estimates) on its current roster of customers.
Wednesday's deal, ICG's largest to date, comes on the heels of the 30 percent stake it took last month in eCredit.com, an online financing company, for roughly $450 million. Executives would not say specifically how much of an interest ICG's investment in RightWorks represents, saying only ICG acquired more than 50 percent.
Since it was established in 1996, ICG has been buying into B2B market-makers as well as software and service providers that enable them to operate. However, the company typically has not purchased controlling interests in the companies it brought in its fold.
"We wanted to have more of a controlling interest in RightWorks, because we view it as key to our strategy," Mary Coleman, ICG's managing director of operations, said in an Interview Wednesday.
"We see it as our open operating-system platform for building market makers," Coleman added. "RightWorks technology is really at the heart of that platform."
ICG shares were down 1-29/32, or 1.4 percent in average volume Nasdaq trade Wednesday afternoon.
For its part, RightWorks, gains access to ICG's technical expertise as well as the growing number of B2B market makers that make up its network, according to Vani Kola, RightWorks' founder and chief executive.
"Right now, the company has 105 people; we have about 20 customers and great revenue momentum," she said. "Now, being part of the ICG network, I think we are poised to execute and lead in this digital marketplace. This is the biggest thing I've seen in a while."
Although she declined to discuss specifics, Kola said that RightWorks' current revenue run-rate is comparable with that of B2B Web companies such as Ariba and CommerceOne.
Coleman also said that part of the reason ICG decided to take a controlling interest in RightWorks is because it plans to bring the company public.
"We intend to take RightWorks public as an independent public company and still maintain a big equity stake within that company before the end of this year," she said.
Separately, VericalNet on Wednesday said it would buy Tradeum, a San Francisco-based B2B e-commerce company, for roughly $500 million in stock.
VerticalNet Executive said that acquisition will help the company accelerate the delivery of a core technology platform, including exchange capabilities, to its existing 55 communities and growing network of domestic and international joint ventures.
VerticalNet will also extend its reach by leveraging Tradeum's capability to deliver Internet solutions to Global 2000 companies and Net Market Makers, VerticalNet said.
VerticalNet shares were up 15 at 252-1/2 in afternoon Nasdaq activity Wednesday, a 6.3 percent gain from the open. 
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