Chicago's Divine Inc., the Internet incubator turned software company, continued its buying binge Monday with an agreement to acquire eShare Communications Inc. in a stock deal valued at about $71 million.
EShare, with about 400 employees and $84 million in sales last year, provides software and services to help companies reach customers via telephone, e-mail and interactive Web sites.
The Georgia-based firm is the sixth acquisition in as many months for Divine, which is reinventing itself as a provider of Web-based software, hosted applications and services for large enterprises.
In all but two of the six deals, Divine used its battered stock to purchase equally beaten-down assets.
Founder and Chief Executive Andrew "Flip" Filipowski said Monday that the "outlandishly low" prices afford an "opportunity of a lifetime" to build a leader in the devastated Web-based technology sector.
"There is room for an emerging giant to be created," he said during a conference call with eShare Chairman and CEO Aleksander Szlam.
Divine's shareholders, however, remained unconvinced. Divine's stock fell 14 cents Monday, to $1.36, on heavier-than-usual volume.
Divine's stock is trading below the $1.65-per-share value of its cash on hand--$222 million as of March 31, an indication that shareholders believe Divine's assets are worth less than Divine paid. EShare's stock, meanwhile, climbed nearly 88 percent Monday, to $2.40, on the buyout news.
Divine agreed to pay between $3.12 and $3.65 per share for each of eShare's outstanding common shares. The final price will depend on Divine's stock price when the deal is completed. A closing is expected by the end of September, pending shareholder and regulatory approval.
Divine also announced Monday a definitive agreement in a previously announced deal to buy Massachusetts-based RoweCom Inc. for about $14 million in stock.
RoweCom, with 600 employees and $348 million in sales last year, provides Web-based applications to help businesses and libraries handle purchases of magazines, newspapers, journals and books.
"We will have substantial opportunities to grow all of these businesses," Filipowski said. "We also expect to extract significant cost-savings."
Observers are skeptical.
To me, it looks like they're trying to integrate a hodgepodge of businesses," said Morningstar Inc. analyst George Nichols. "I think the integration risks are enormous."
Substantial cost savings may be elusive, experts said, noting that both eShare and RoweCom will operate as wholly owned subsidiaries.
An equally important question is whether Divine can grow the acquired businesses by cross-selling their diverse offerings. Several of the acquired companies are pioneers, but none is a brand-name leader.
"Enterprises want best-of-breed solutions rather than a one-stop shop of second-tier applications," Nichols said.
EShare has its roots in a company started in the mid-1980s, Melita International Corp., to provide call-center equipment and software.
The company lost $2.3 million in the first quarter and had less than $10 million cash as of March 31.
"Melita has really brilliant technology, but they made an expensive acquisition [in eShare]," said Donald Newman, an analyst at Ladenburg Thalmann. "Lately, they've done a very good job in coming back ... but there's no question they need more cash."
Enter Divine--with substantial cash. The two CEOs were well-acquainted. Filipowski has been a director of eShare since 1999, and Szlam was a director of Divine's predecessor, Divine Interventures Inc. Szlam will join Divine as chief strategy officer.