Two prominent online catalog retailers today announced plans to join forces. Merrimack, NH-based PC Connection Inc. — owner of
— will acquire Kent, Conn.-based
Cyberian Outpost Inc.
in a stock-for-stock transaction.
According to a statement offered today, the tax-free merger has been unanimously approved by the boards of both companies and is expected to close in the third quarter of 2001, subject to the approval of Cyberian Outpost stockholders and other closing conditions.
PC Connection Inc. chairman and CEO Patricia Gallup said the acquisition is consistent with her company’s growth strategy and complementary to how they’re already doing business.
“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,” said Gallup.
We’re not sure, but we think that’s a fancy way of saying that she thinks they’ll make money on the deal.
Cyberian Outpost’s founder, Darryl Peck, plans to stay on with the company following the transition — the Cyberian Outpost president and CEO will report to PC Connection Executive Vice President Robert Wilkins.
Although both companies have interests beyond just the Macintosh, the Mac market has long regarded both MacConnection and Cyberian Outpost as Mac-friendly retailers. The financial stats the two companies offer as part of this announcement suggest an interesting contrast, however. PC Connection said that only about nine percent of its most recent quarterly sales were accounted for as Apple-related. For Cyberian Outpost, a full quarter of its sales were made to Mac buyers. Hopefully that emphasis won’t change negatively for Mac users — PC Connection Vice Preseident Wilkins says that a multichannel, multibrand strategy is key to his company’s continued growth and success.
The actual value of the acquisition depends on market conditions between now and August. The stock conversion from Cyberian Outpost to PC Connection will depend partly on the revenues that Cyberian Outpost produces over the next three months, as well as the trading price of PC Connection’s stock over a ten-day period prior to the closing. Cyberian Outpost has the option to back out of the acquisition agreement if PC Connection’s stock takes a nosedive.
Under the terms of the agreement, PC Connection is also extending Cyberian Outpost a badly needed credit line of up to US$3 million and an inventory line of credit of up to $5 million. Cyberian Outpost is using its assets as security for the loans.