PSINet Finally Up for Sale
PSINet officials are expected to announce the company is officially for sale today, according to sources close to the struggling data carrier.
The heavily debt-ridden company is nearly out of operating capital. The deal will be brokered by The Goldman Sachs Group, which PSINet hired late last year to examine strategic options. PSINets current market capitalization is $233 million. The stock is trading at slightly more than $1 per share.
"An announcement like this is usually a really bad sign: Its a capitulation, a demonstration that things are not working out, and it puts them in a desperate position because they would find themselves in a buyers, not sellers market," said David Takata, a financial analyst at Gerard Klauer Mattison & Co.
The PSINet sale comes as a hard blow to founder and Chief Executive William Schrader, who steadfastly resisted pressure to sell the company during the heyday of Internet service provider mergers and acquisitions in the late 1990s.
A PSINet spokesman said the company doesnt comment on rumors and speculation.
Last week, PSINet moved a scheduled earnings call back another month, to March 29. To the financial community, this indicates the carrier is trying to pull together a deal that would give it enough cash to continue operations beyond June.
Rumors of a sale have circulated for months. Interactive Week reported in January that PSINet was actively shopping its transaction services unit and pieces of Metamor Worldwide. The latest speculation is that UUnet founder Rick Adams is actively negotiating with PSINet for the Web hosting and international network divisions.
Takata doubts an individual buyer will emerge to gobble up all of PSINets assets, together with its $3.6 billion junk-bond debt. Rather, he said, PSINet might go the way of Verizon Communications spin-off of Genuity or WorldComs acquisition of Digex, where a large telephone company took a controlling equity stake in a carrier and launched a massive reorganization, without piling up the carriers assets and debts on its balance sheet.