RealTime IT News

El Sitio Sells Argentinean Connectivity Business

Buenos Aires-based Internet media firm El Sitio Inc. -- which targets Spanish and Portuguese speakers in Latin America and the U.S. -- Monday moved forward with a plan to cut away its non-core services and focus enhancing its Internet network and the development of interactive content.

El Sitio Monday said it sold its Argentinean connectivity business Netizen SA, one of Argentina's largest ISPs. Terms of the transaction were not disclosed, but El Sitio said it would reveal the details in the near term.

The deal adds another 25,000 subscribers to Netizen, bringing it to a total of 200,000 subscribers. Netizen was recently acquired by SkyOnline de Argentina, which is actively looking for ways to expand Netizen's subscriber base in order to sell broadband connectivity and value added services to those customers.

El Sitio recently announced that it would be divesting its non-core connectivity services in Argentina, Brazil and Colombia. The sale of the Argentinean arm comes on the heels of an announcement that the firm signed a preliminary letter of intent for sale of its Columbian connectivity business. That deal is still under negotiation.

"Our agreement with Netizen is a significant step in our planned divestiture of non-strategic connectivity assets," said Leandro Anon, chief operating officer of El Sitio. "This transaction permits us to continue with our strategy to focus on the development of interactive content."

El Sitio common stock was trading up on the news of the deal Monday morning, hitting a price of 68 cents a share off an opening of 64 cents.

But while investors appeared to be pleased by the sale, a class action lawsuit against the firm, launched Friday, still looms large.

The law firm Stull, Stull & Brody Friday filed a suit in the United States District Court for the Southern District of New York on the behalf of purchasers of El Sitio common stock between Dec. 9, 1999 and June 7, 2001. The suit alleged that El Sitio, Roberto Vivo-Chaneton, Roberto Cibrian-Campoy, Horacio Milberg, Alfredo Jimenez de Arechaga, Carlos Cisneros, Michael Greeley, Guillermo Liberman, Ricardo Verdaguer, Michael Levitt and Sofia Pescarmona violated the federal securities laws by issuing and selling El Sitio common stock without disclosing to investors that some of the underwriters of the Dec. 9, 1999 IPO, including the lead underwriters, had solicited and received excessive and undisclosed commissions from certain investors.

According to the complaint, joint lead underwriters Credit Suisse First Boston Corp. and Lehman Brothers Inc., as well as members of the underwriting group Merrill Lynch, Pierce, Fenner & Smith Inc., Salomon Smith Barney Inc. and Wit Capital Corp. allocated El Sitio shares to customers at the IPO price of $16 per share. In exchange, the underwriters' brokerage customers allegedly had to agree to purchase additional shares in the aftermarket at progressively higher prices. That requirement was intended to artificially inflate the price.