Irvine, California – (The Hosting News) – October 13, 2006 – Integrated web hosting and audio and video streaming provider, VitalStream Holdings, Inc., will be acquired by Internet performance network services company, Internap Network Services Corporation.
James P. DeBlasio, Chief Executive Officer of Internap remarked, ”The marketplace for content delivery services is rapidly expanding as the needs for companies to integrate streaming audio and video into their web presence become more critical and more complex. The combination of VitalStream’s content delivery services and our high performance intelligent route control solutions positions us to create the market leading platform for distribution of rich media content and advertising. We will offer our combined customers a wider range of complementary products providing peak website performance, global scalability and new revenue opportunities including content monetization and on-line advertising. Together, we expect to become a formidable force in the rapidly growing streaming media and content delivery market.”
Under the terms of the transaction, Internap will issue approximately 11.9 million shares of common stock in respect of outstanding VitalStream common shares, which will represent approximately 26% of the combined company’s shares. This is an exchange ratio of 0.5132 Internap shares for every VitalStream share. In addition, Internap will assume VitalStream’s currently outstanding stock option plans. Based on the closing price of Internap’s stock on October 11, 2006, the transaction is valued at an aggregate purchase price of approximately $217 million. The acquisition is expected to close by the first quarter of 2007.
Jack Waterman, Chairman and Chief Executive Officer of VitalStream added, ”Internap’s acquisition of VitalStream is a business combination that creates a scalable public company with complementary product lines and accelerated growth potential. We believe that this is an exciting value proposition for our customers including unparalleled distribution, network quality and customized solutions, as well as a unique alternative for investors. The new Internap will offer turnkey digital media broadcasting solutions for web users of all sizes. By uniting our two organizations, customers will have a complete solution to realize the full on-line potential of their digital assets.”
According to the company, the transaction is expected to be slightly dilutive to Internap’s 2007 EBITDA per share after considering the impact of expected revenue and cost synergies, but begins to be accretive in 2008 and beyond. The company also expects the impact of the acquisition will increase its organic revenue growth rates. Specifically, the companies expect to capitalize on significant growth opportunities resulting from the combined companies’ ability to sell Vital Stream’s services into Internap’s large and growing customer base, and Internap’s global presence. The companies also believe there are significant opportunities for operating cost synergies for calendar year 2007 and beyond.
It is anticipated that the combined company will result in:
- Internap holding a market leadership position delivering streaming media content
- Internap’s ability to access the high-growth streaming media and on-line advertising segments
- The strongest, most complete product line in content delivery solutions, content monetization, and on-line advertising
- Significant new organic growth potential coupled with cross selling opportunities
The combined company will have:
- More than 450 total employees
- More than 135 quota-carrying salespeople
- More than 3000 enterprise customers
By combining the two companies’ product lines, Internap will be able to meet the needs of customers seeking to both deliver rich media content to their users and monetize that content. The combination of VitalStream’s content delivery services, content management tools and particular expertise in Adobe (formerly Macromedia) Flash technology, with Internap’s high performance route management network, will enable the new organization to easily address the needs of enterprises seeking to deliver large format media files in a streamed environment.
Internap has recently announced network upgrades and continued colocation growth to support these customer requirements and is recognized as the industry leader in performance network services. VitalStream is the solution of choice for over 800 enterprise customers and its development and support capabilities for Adobe Flash and Windows Media customer implementations set it apart in the industry. By introducing VitalStream’s capabilities to Internap’s customer base, the potential exists to create a new market leader in the content delivery arena.
Internap sees several immediate opportunities for growth:
- Product cross-sell. Cross-selling products between the respective companies’ customer bases
- Geographic penetration. Leveraging Internap’s industry leading performance network services and significant network footprint, in particular, Internap’s well established presence in the United States, Europe and Asia, will address a growing opportunity across VitalStream’s customer base and offer a global content delivery solution for Internap’s customers.
The transaction is expected to close in the first calendar quarter of 2007, and is expected to be tax free to shareholders of both companies with respect to the stock consideration the shareholders receive. The transaction is subject to regulatory reviews and approvals, including the Hart-Scott-Rodino Act; approval by the shareholders of Internap and VitalStream; and certain other customary closing conditions. Thomas Weisel Partners LLC acted as financial advisor to Internap. RBC Capital Markets acted as financial advisor to VitalStream.
The officers and directors of VitalStream may have interests in the proposed acquisition, some of which may differ from, or may be in addition to, those of the stockholders of VitalStream generally. A description of the interests that the officers and directors of the companies have in the proposed transaction will be available in the Joint Proxy Statement/Prospectus.
Internap is an intelligent route control solutions provider that endeavors to bring reliability, performance and security to the Internet. The company’s patented and patent-pending technologies address the inherent weaknesses of the Internet, enabling enterprises to take full advantage of the benefits of deploying business-critical applications such as e-commerce, VoIP, and audio/video across IP networks. Internap currently serves more than 2,100 customers throughout North America, Europe, Asia and Australia.
VitalStream, Inc., a wholly owned subsidiary of VitalStream Holdings, Inc., is a global provider of integrated content delivery services that endeavors to enable businesses to broadcast digital media and communications to worldwide audiences via the Internet. The company provides complete solutions, including video and audio streaming, advertising placement, delivery, reporting and analysis, live event broadcasting, media asset management, integrated web hosting and consulting services, designed to seamlessly integrate with leading streaming media technologies. VitalStream engineered its content delivery network certified for quality delivery in the United States, Europe and Asia. VitalStream’s customer base includes many of the largest and fastest growing streamers of audio and video content, including Disney and Myspace.com. Notable new customers added during the second quarter of 2006 include Greyhound, the United Nations, Microsoft Prodigy, Buy.com, QuePasa, Home Depot and Gillette.
To learn more about Internap, please visit: www.internap.com.
For more informatiom about VitalStream, please visit: www.vitalstream.com.