RealTime IT News

Outpost Finds a Way Out

Founded as an online retailing pioneer in 1995, beleaguered Cyberian Outpost Inc. (a.k.a. Outpost.com) found a way out of its difficulties today when it agreed to be purchased by PC Connection Inc.

Merrimack, N.H.-based PC Connection, a direct marketer of personal computers, said the deal is being structured as a stock-for-stock, tax-free merger and comes with a PC Connection working capital line of credit for Outpost of up to $3 million and an inventory line of credit of up to $5 million, each of which will be secured by Cyberian Outpost's assets.

The financial terms are somewhat complicated:

Each share of Kent, Ct.-based Cyberian Outpost common stock will be converted into shares of PC Connection stock based upon an exchange ratio that will vary with the level of total revenues generated by Cyberian Outpost for June, July and August 2001, as well as with changes in the average closing price of PC Connection common stock over a 10-day period ending four days prior to the closing.

PC Connection closed Tuesday at $16.03; Cyberian closed at 80 cents. PC Connection also received an option to acquire from Cyberian Outpost up to 19.9 percent of its common stock at a price of 51 cents per share.

"This acquisition is consistent with our stated growth strategy and complements our existing business," said Patricia Gallup, chairman and CEO of PC Connection. "Based on anticipated cost savings and gross margin enhancements, we believe the transaction will be accretive to PC Connection's earnings per share in the first year."

Outpost slashed its work force in early April by 110 employees, or 30 percent, and replaced president and CEO Katherine Vick with its chairman and founder, Darryl Peck. Its CFO later bailed out, also.

Outpost reported a net loss of $9.5 million, or 30 cents per share for the fourth quarter that ended Feb. 28, on sales of $120.9 million.

PC Connection was founded in 1982 with an original investment of $8,000. Its sales for the year 2000 were $1.45 billion. The company is focused on serving the information technology needs of the SMB market (small- and medium-sized businesses).