Investors Wonder Whether Ventro is Up for Grabs

The magic talk of consolidation was spreading through the B2B sector Friday.

Investors were bidding up Ventro's (VNTR) stock on speculation that it would be acquired by VerticalNet (VERT).

Ventro's stock was up 75 cents, or 4.6%, at $17.25 a share. Its rise stood in sharp contrast to the action among other B2B stocks and the weak Nasdaq. Friday's climb also follows a 56% rise since early August. VerticalNet was off $2.75, or 5%, at $51.25.

Ventro has done little to diminish the talk. In fact, it backed out of a scheduled presentation at the Robertson Stephens Internet Conference this week and postponed a scheduled day for analysts.

Officials at Ventro and VerticalNet couldn't immediately comment.

Chris Vroom, an analyst with Credit Suisse First Boston, believes something is up. (He rates Ventro a hold and VerticalNet a strong buy. His firm hasn't performed underwriting for either company.)

He pointed out that Ventro said it was canceling its analyst day because it didn't want to violate the Securities and Exchange Commission's new fair disclosure rules -- which haven't taken effect yet -- but canceled its Robbie appearance because of "scheduling conflicts."

"They don't have their story straight, which would suggest that there's potential for some other event to unfold," Vroom said.

A merger would make sense for both companies, he said. It would give struggling Ventro, which operates online exchanges in the life sciences and health industries, the backing of VerticalNet's big name in B2B. For VerticalNet, it would lend some credibility to the company's online exchange initiatives, which have been criticized for lacking much B2B substance.

VerticalNet runs 57 communities on the Internet for professionals in different industries. It's aim is to give suppliers a pipeline where they can get leads to sell their goods. Ventro's online exchanges would offer a nice place for them to do just that.

"There's a lot of complimentary aspects between the two companies' approaches, and VerticalNet in the past has said they'll be making acquisitions," said Vroom. "And in fact, they have been acquisitive."

In the last year and a half, VerticalNet has scooped up 18 other companies, including its NECX computer chip exchange. But the company has been criticized because very little of its business actually happens online. With Ventro's technology, that could change.

"We believe VerticalNet will seek to expand its marketplace to become more fully functional, and Ventro could confer upon VerticalNet this huge technology platform that they've spent $100 million developing," Vroom said.

But Tim Klein, an analyst at U.S. Bancorp Piper Jaffray, warns that an acquisition could hamper VerticalNet's effort to turn a profit. (Klein who rates VerticalNet a strong buy and doesn't cover Ventro. His firm hasn't done underwriting for VerticalNet.)

"They've been plenty religious about wanting to be the first profitable B2B," he said.

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