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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report August 10, 1998
(Date of earliest event reported: July 28, 1998)
VERIO INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 0-24219 84-1339720
(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
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8005 South Chester Street, Suite 200, Englewood, Colorado 80112
(Address of Principal Executive Offices) (Zip Code)
(303) 645-1900
(Registrant's telephone number, including area code)
Not applicable.
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On July 28, 1998, the Registrant, Purple Acquisition, Inc., a
California corporation and a wholly-owned subsidiary of the Registrant ("Merger
Sub"), and Best Internet Communications, Inc., a California corporation
("Best"), entered into an Agreement and Plan of Merger (the "Merger Agreement")
providing for a merger of Best with and into Merger Sub (the "Merger"), with
Merger Sub surviving as a wholly-owned subsidiary of the Registrant.
In connection with the consummation of the Merger, the Registrant will
issue, or reserve for issuance upon the exercise of warrants or options to
purchase shares of the common stock of Best "(Best Common Stock") assumed by the
Registrant as warrants or options to purchase shares of the common stock of the
Registrant ("Registrant Common Stock"), as further described below,
approximately 8.67 million shares of Registrant Common Stock and will pay
approximately $101 million in cash, subject to adjustment for certain excess
transaction expenses incurred by Best. Consequently, based on the capitalization
of Best at the time of execution of the Merger Agreement (including both shares
of Best Common Stock then issued and outstanding and shares of Best Common Stock
issuable upon the exercise of options and warrants to purchase shares of Best
Common Stock then outstanding), shareholders of Best will receive approximately
$2.82 in cash and 0.2042 shares of Registrant Common Stock in exchange for each
share of Best Common Stock outstanding at the effective time of the Merger
(which amounts of cash and shares are subject to adjustment prior to the
effective time of the Merger to reflect excess Best transaction expenses, as
noted above, and further are subject to adjustment to the extent that the
capitalization of Best changes prior to the effective time). Each warrant or
option to purchase a share of Best Common Stock which is outstanding and
unexercised at the closing of the Merger will be assumed by the Registrant as a
warrant or option to purchase approximately 0.2973 shares of Registrant Common
Stock (subject to similar adjustment prior to the effective time of the Merger).
Under the terms of the Merger Agreement, Best will be entitled to
designate one person (who must be reasonably acceptable to the Registrant) to
serve on the Registrant's Board of Directors.
The Merger is intended to qualify as a tax-free reorganization. The
Merger is subject to certain conditions, including the approval of the
respective shareholders of Best and the Registrant as required by law and the
termination or expiration of waiting periods with respect to the
Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended. Pursuant to
agreements signed contemporaneously with the execution of the Merger Agreement,
each of the executive officers of Best and one other shareholder, who
collectively hold approximately 60% of the outstanding shares of Best Common
Stock, have agreed to vote their shares in favor of the Merger. The Registrant
is obligated to use its best efforts to cause holders of at least 35% of the
shares of Registrant Common Stock outstanding at the time of execution of the
Merger Agreement to agree, by August 17, 1998, to vote their shares in favor of
the Merger (the "Registrant Voting Agreements").
The Merger Agreement requires the Registrant to pay Best a fee of $10
million in the event of any termination of the Merger Agreement (i) by either
the Registrant or Best, if any approval of Registrant stockholders required
under applicable legal requirements for the consummation of the Merger or the
issuance of shares of Registrant Common Stock in connection therewith shall not
have been obtained by reason of the failure to obtain the required vote at a
duly held meeting of Registrant stockholders or at any adjournment thereof, or
(ii) by Best if the Registrant fails to deliver the Registrant Voting Agreements
described above.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits.
99(a) Press release issued by the Registrant and Best dated July 29,
1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VERIO INC.
By: /s/ Carla Hamre Donelson
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Carla Hamre Donelson
Vice President, General
Counsel and Secretary
Dated: August 10, 1998
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Exhibit Index
Exhibit No. Description
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99(a) Press Release issued by the Registrant and Best
dated July 29, 1998.
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Verio to acquire Hiway Technologies, creating global leader in Web hosting
Acquisition gives Verio largest number of domain-based Web sites and powerful
distribution channels in the U.S. and over 100 countries
ENGLEWOOD, COLORADO (July 29, 1998) -- Verio Inc. (NASDAQ:VRIO), a leading
full-service business Internet provider, today announced that it will acquire
Boca Raton, Florida-based Hiway Technologies, Inc., a leading Web hosting
company. The combination of the two Internet industry leaders creates the
world's largest and fastest-growing domain-based Web hosting company with more
than 150,000 Web sites.
The combined companies create a powerful sales and marketing engine that is
driven by preferential marketing agreements with leading Internet portal
companies, private label relationships with major telecommunications companies
and direct sales through over 150 sales professionals. With the addition of over
2,000 resellers through Hiway's wholly-owned RapidSite, Inc. subsidiary, Verio
will market its Web services through over 4,000 resellers in the U.S. and in
over 100 countries around the world. Verio's expanded marketing capabilities
will further increase the Company's reach within the small and mid-size business
market, which according to industry analyst firm Forrester Research will
continue its dramatic growth, quadrupling last year's revenues to nearly $1
billion in 1998, on its way to over $10 billion in 2002.
Verio and Hiway together host more domain-based (.com, .net, .org) Web sites
than any other Internet company. Hiway's recent merger with Best Internet
Communications in Mountain View, California, established it as one of the
world's leading providers of business Web hosting services, bringing more than
90,000 Web sites to Verio's base of 60,000 Web sites. In addition, the
combination of the two companies brings together some of the strongest
management teams in the Web hosting industry, and strengthens Verio's
comprehensive suite of Web hosting, electronic commerce and other enhanced
Internet service offerings. The combined companies will leverage Verio's Tier
One national network and scalable national systems for billing, accounting,
customer care and network operations.
Today's announcement also means that Verio Northern California and Best Internet
- -- two of Northern California's largest and most prominent providers of
high-speed connectivity -- will join forces, with Best Internet increasing
Verio's regional revenue base by over 75 percent. The combination further
expands Verio's operational economies of scale and will greatly increase the
Company's sales and marketing presence in the key Northern California market.
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"We are thrilled with the opportunity to combine forces with Hiway, whose strong
management team, impressive operating results and leading industry position make
them one of the industry's premier companies," said Verio Chief Executive
Officer Justin L. Jaschke. "This transaction underscores Verio's position as the
leading industry consolidator and achieves our objective of driving enhanced
services to 50 percent of revenues several years sooner than expected. In
addition to creating the clear global leader in Web hosting, the combination
further strengthens our connectivity business by bringing together two of the
leading providers in Northern California. With leadership positions in both
connectivity and Web hosting, Verio has a balanced base in the two fundamental
platforms for delivering a broad range of enhanced internet services to meet the
growing needs of businesses."
"Hiway had many options to move forward as a company, including to proceed with
our recent filing to go public, " said Arthur L. Cahoon, Hiway Chairman and
Chief Executive Officer. "The merger with Verio provides us with an established
infrastructure that will scale to a national level, and give our customers the
full suite of Internet services they need. Verio's high-speed national network
and regional data centers will provide the delivery system for next-generation
Web hosting services for small and mid-sized businesses. We have enormous
confidence in Verio's future and strongly believe this is the best possible
direction for Hiway's continued growth."
FINANCIAL BACKGROUND
Hiway had $9.7 million of revenue and $1.4 million of operating income for the
second quarter of 1998. The combined companies expect to realize savings of
approximately $5 million per year phasing in through the second half of 1999 as
a result of synergies resulting from telco and transit cost reductions, shared
data centers, joint product development, shared infrastructure and increased
economies of scale. The company expects to incur one-time expenses through
mid-1999 associated with the integration of these businesses.
TERMS OF AGREEMENT
Under the terms of the Agreement, in exchange for each share of Hiway stock
outstanding, Hiway shareholders will receive approximately $2.82 in cash and
0.2042 shares of Verio common stock (subject to adjustment to the extent that
Hiway's fully diluted capitalization changes prior to closing). Each Hiway
warrant and option which remains unexercised at the time of closing will become
a warrant or option to acquire approximately 0.2973 shares of Verio common
stock. Based on these fixed exchange ratios, the total transaction consideration
will consist of $101 million in cash and approximately 8.67 million shares of
Verio common stock. As a result, the Hiway shareholders will own approximately
19% of the pro forma combined company on a fully diluted basis. Hiway will be
entitled to designate one member to serve on Verio's Board of Directors. The
parties currently anticipate that the transaction will close in the fourth
quarter of 1998, subject to satisfaction of closing conditions, which include
shareholder approval by both companies and Hart Scott Rodino filings.
About Verio Inc.
Verio Inc. is a leading national provider of Internet connectivity, Web hosting
and enhanced Internet services, with an emphasis on serving small and
medium-sized businesses. Since its inception in March 1996, Verio has rapidly
established a national presence through the acquisition, integration and growth
of local and regional Internet providers with a business customer focus that
provide locally-based sales and engineering support in 37 of the top 50 U.S.
markets under the Verio brand name.
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For more information on Verio, visit the company's Web site at www.verio.net or
call 1-888-GET-VERIO. The corporate headquarters are located in Englewood,
Colorado at 8005 S. Chester St., Suite 200, 80112, phone number 303-645-1900.
About Hiway Technologies, Inc.
Hiway Technologies, Inc. was founded in 1995 to offer reliable, high-performance
Web hosting services to individuals and small-to-medium-sized businesses. The
company's recent merger with Best Internet Communications created the world's
leading provider of business Web hosting services with more than 90,000 hosted
Web sites. The merger expanded Hiway's services to include Web hosting, regional
Internet access, advanced e-commerce, and Web server co-location solutions.
Directly, and through its worldwide network of resellers, the company offers
customers a broad range of affordable Web hosting service plans backed by
state-of-the-art, high-end Web servers, six T3 connections, uninterruptible
power, and backup generators for the ultimate in reliability. For more
information, please visit the Hiway Technologies World Wide Web site at
http://www.hiway.com.
Except for the historical information contained herein, certain matters set
forth in this press release are forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward looking statements are subject to risks and uncertainties,
including but not limited to fluctuations in operating results, additional
capital requirements, competition, integration of acquisitions and
implementation of network infrastructure. Readers are also encouraged to refer
to the Verio's reports from time to time filed with the Securities and Exchange
Commission including Verio's Current Report on Form 8-K dated July 7, 1998 for a
further discussion of the Verio's business and risk factors that may affect
operating results.
