Verticalnet Buys Atlas Commerce

Verticalnet's acquisition of Atlas Commerce for $24 million strengthens its strategic sourcing offerings.

E-procurement software developer Verticalnet Inc. has acquired Atlas Commerce Inc., a provider of strategic sourcing applications and software for private business-to-business exchanges.

In a deal valued at about $24 million, Verticalnet, of Horsham, Pa., early this week announced that it had acquired all outstanding Atlas securities in exchange for about 14.3 million shares of Verticalnet common stock and $3.5 million in cash. Verticalnet also assumed the Atlas employee stock option plan.

Safeguard Scientifics Inc., Atlas largest shareholder, will receive approximately 10.5 million shares of Verticalnet stock.

With the Atlas acquisition Verticalnet is making good on its promise to deliver private e-marketplace solutions. The integration of Atlas technology will plant Verticalnet squarely in the strategic sourcing market, officials said.

Verticalnet has undergone some significant shifts in focus as its initial business model of selling public e-marketplace software proved unsuccessful. In April 2001, the company announced major restructuring plans. Spurred by then newly instated CEO Mike Hagen, the company revamped its organizational structure, hired a new executive staff and morphed from public-e-marketplace-provider-turned-software-maker to a private e-marketplace software provider.

At the same time, Verticalnet announced a revamped deal with Microsoft Corp, whereby the Redmond, Wash., developer agreed to pump $40 million into Verticalnet to help it secure adoption of its collaborative sourcing product set amongst Verticalnets substantial supplier base. In exchange for the cash infusion, Verticalnet agreed to promote Microsofts technology platform as the enablement backbone for small and mid-sized companies.

Both companies also agreed to put an additional $10 million into the deployment of products, services and marketing initiatives.

To that end, Verticalnet will integrate Atlas Commerces solutions to help customers simplify and manage the complexity of a collaborative supply chain. Verticalnets Collaborative Sourcing suite will optimize profit opportunities for the enterprise by driving competitive advantage across the supply chain, officials said.

However, Verticalnet is late to the game and facing some stiff competition. Last month Oracle Corp. and Commerce One Inc. each announced strategic sourcing initiatives. Those followed on the heels of similar announcements from PeopleSoft Inc. and Ariba Inc.

Verticalnet could get a boost from Atlas customers, which include the likes of the Valvoline Co., Joy Global and TradeMC Inc., a capital goods e-marketplace.

Robert F. Bernstock, president and CEO of Malvern, Pa.-based Atlas, will join Verticalnets board of directors.