Monday said it would buy Internet services provider
to provide expanded voice data and Internet communications services, triggering enthusiasm among investors and the resignation of one top officer.
The merger transaction is valued at around $2.9 billion, according to a statement from Nextlink.
Shares of Nextlink, based in McLean, Va., jumped 5%, or 4, to 82 1/2 while Concentric, based in San Jose, Calif., surged 37%, or 11 1/4, to 41 1/4 in trading on
. (Nextlink closed down Monday 1 7/16, or 1.83%, at 77 1/16. Concentric closed up 9 5/8, or 32%, at 39 5/8.
Nextlink also announced that chief financial officer Mark Gunning, who joined the company in November, will leave his position immediately for medical reasons.
William Hoglund, chief financial officer for
Eagle River Investments
, one of its largest investors and a member of the Nextlink board of directors, will serve in his place until a permanent replacement is found.
Nextlink provides broadband communication services over fiber optic and wireless facilities. Concentric provides Web hosting, data center services, and private networks for small- and medium-sized businesses.
Under the agreement, each share of Concentric Network common stock will be exchanged for $45.00 of Nextlink common stock, subject to a collar. The actual number of shares of Nextlink common stock to be exchanged for each Concentric Network common share will be based on the 20-day average trading prices of Nextlink common stock prior to closing. Based on Nextlink's closing price of $78.50 on Friday, the ratio would be 0.573 Nextlink shares per Concentric Network share and Concentric Network shareholders would hold approximately 17.8% of the shares of the combined company.
"With the addition of Concentric's top management in the Internet service business to the Nextlink team, we firmly believe that the combination of these two entrepreneurial companies will quickly provide dramatic and significant cross-selling opportunities and other synergies," said Nextlink chairman and chief executive Dan Akerson, who will continue in his roles in the new company.
Concentric chief executive Henry Nothhaft will become a vice chairman of Nextlink and lead the retail Internet and data services of the combined company.
Nextlink also expects to increase higher margins by migrating local and data traffic onto its broadband metropolitan and broadband wireless networks as well as onto its national network infrastructure, the company said. Additionally, both companies said they could grow revenues by cross-selling local telecommunications and data and Internet services.
The combination of the two companies will solidify its position among small- and medium-sized business and allow it to step up to aggressively compete for business from Fortune 1000 companies, the statement said.
"Nextlink is the physical connection point to our broadband and fiber optic network," said Nextlink spokesman Todd Wolfenbarger. "Concentric is the virtual piece. They have the services that run across the wires."