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Verio Buys Web Hosting Firm

In the second acquisition of its kind for the company this month, Internet services provider Verio Inc. said today it will acquire Florida-based Web hosting company Hiway Technologies Inc. in a cash and stock deal valued at approximately $351 million.

The move is aimed at strengthening Verio's strategy of targeting the small- and medium-sized business market with its connectivity and hosting services, both domestically and overseas.

Under terms of the agreement, Hiway shareholders will receive roughly $2.82 in cash and 0.2042 shares of Verio common stock (subject to adjustments) in exchange for each share of Hiway stock outstanding.

Verio said that contingent upon fixed exchange ratios, the total transaction amounts to $101 million in cash and about 8.67 million shares of Verio common stock valued at around $250 million. This will give shareholders of Hiway a 19% stake of the pro forma combined company on a fully diluted basis.

According to Verio, the Hiway purchase will give it the largest number of domain-based Web sites in the world--over 150,000 sites hosted. The acquisition is also aimed at giving Verio broader distribution channels in the U.S. and in more than 100 countries globally.

Verio added that the recent Hiway merger with Mountain View, CA-based Best Internet Communications will bring it an additional 90,000 Web site customers.

Hiway's Web hosting management team and 150 salespeople will be folded into Verio's operations, and an additional 2,000 resellers will be added through Hiway-subsidiary RapidSite Inc., bringing Verio's resellers to the 4,000 mark in the U.S. and internationally.

The Hiway acquisition also means that connectivity providers Verio Northern California and Best Internet will be combined to boost Verio's regional revenue base by 70%, the company said.

Hiway posted $9.7 million in revenue and $1.4 million in operating income for the second quarter of 1998.

"This transaction underscores Verio's position as the leading industry consolidator and achieves our objective of driving enhanced services to 50% of revenues several years sooner than expected," said Verio CEO Justin L. Jaschke, in a statement announcing the deal. "In addition to creating the clear global leader in Web hosting, the combination further strengthens our connectivity business."

On July 7, Verio also bought domain name registrar and Web hosting provider TABNet for $45.5 million in a move aimed at securing a new market channel to target small- and medium-sized businesses.

Wall Street reacted positively to today's news--Verio (NASDAQ: VRIO) was up 2 1/8 to 28 1/2 in mid-morning trading.