SBC Communications Buys Sterling Commerce

SBC Communications Inc. took a mammoth step
Tuesday in becoming a power in the business-to-business e-commerce sector
with its purchase of e-business integration firm Sterling Commerce Inc. for $3.9
billion in cash.

The deal is structured as a $44.25 per-share cash tender offer followed by a
merger with a subsidiary of SBC. The tender offer is expected to commence in
the next several days and is expected to be completed by late March or
during the second quarter.

What Sterling Commerce (SE)
brings to the table for SBC (SBC)
is its ability to create and manage
“e-marketplace communities,” where multiple buyers and sellers can conduct
real-time transactions, exchange goods and services, collaborate on business
opportunities and share information fast and at low costs.

Sterling Commerce’s software and services are designed to allow customers to build
e-communities, to integrate business processes and to exchange
information within and between enterprises worldwide. The company reported fiscal 1999 revenues of $561 million,
and provides e-marketplace solutions to over 45,000 customers worldwide.

The deal comes at a crucial time for SBC, as companies such as Commerce One (CMRC)
and Ariba (ARBA)
are battling it out across a host of fields in the hopes of grabbing pieces
of the B2B e-commerce pie. According to International Data Corp. (IDC), the
B2B e-commerce industry is expected to grow from $200 billion in 2000 to $2.5
trillion in 2004.

Sterling Commerce will operate as a separate subsidiary within SBC’s Global
Markets group, reporting to president of SBC’s Global Markets group Rich
Dietz, and will remain based in Columbus, Ohio. While it will have substantial
autonomy to pursue growth opportunities, it will work closely with SBC’s
business account teams to offer integrated solutions to customers.

Dietz said the combination of SBC and Sterling Commerce dramatically changes
the competitive landscape of a market, that while growing rapidly, requires
substantial resources and expertise to enter and remain competitive.

“Business customers not only want a leader in e-business integration
solutions, they also want a company that they know and trust, has the
resources and scale to meet their unique needs, and offers high-quality,
reliable network services to connect e-Marketplace communities,” said Dietz.

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