Compaq Computer said yesterday it is considering whether to raise its $266 million takeover bid for Proxicom, after the Internet consulting firm said it favoured the $376 million offered by South Africa`s Dimension Data Holdings.
Proxicom`s chief financial officer told Reuters that price was the main factor in evaluating any counteroffer from Compaq, which is looking to buy Proxicom to strengthen its services business.
"Price is it. Price is what we are looking at,`` Proxicom`s CFO Ken Tarpey told Reuters. "This is about a superior offer being put forward by Dimension Data and what Compaq wants to do about it."
He said he had no indication as to what Compaq was likely to do. "There has been no comment from them," he said. "We are in wait mode like everyone else."
Under an agreement reached between Compaq and Proxicom last month, Compaq had three days to respond if Proxicom deemed a rival offer more attractive.
"The people who were in the original negotiations (with Proxicom) have been notified and we now have three days," said Compaq spokesman Arch Currid. "We are now in that period and are evaluating our options."
Proxicom`s shares closed up 11 cents at $7.64 on the Nasdaq Thursday. Compaq shares closed off 21 cents at $16.10 on the New York Stock Exchange.
Bear Stearns analyst Andrew Steinerman said that the share price, which was above Proxicom`s offer to buy the company for $7.50 per share in cash, suggested investors were betting on a bidding war breaking out between Compaq and DiData.
Compaq`s original bid was for $5.75 per share.
"I am not sure that Compaq has to come in above $7.50," said Steinerman. "Investors are betting the price will go above that. I am not convinced they will need to."
Tarpey said the process, while positive for Proxicom shareholders, was "very legalistic" at this point.
"Our advisers and lawyers are working, and Compaq is doing what they have to do," he said. "It is decision-making time."
Shares in London, where DiData has its primary listing, closed up 8-1/4 British pence, or 2.70%, at 313.7 pence, after dipping to the day`s low of 302 pence, which represents a 10% fall since the offer announcement this week.
The stock, which has been weighed down by investor concern that DiData might be in for a costly bidding war with Compaq over Proxicom, has underperformed the FTSE All Share index by almost 30% so far this year.
Like many other Internet consulting companies, Proxicom`s share price has been on a slide over the past year. Off a high of about $62 seen in January of 2000, the company has underperformed the S&P 500 by more than 80% since that time.
"Spending on Web consulting has fallen off the map," said Steinerman, referring to the sector as a whole.
The takeover moves by Compaq and DiData follow an $80 million deal by IBM to acquire Internet consulting firm Mainspring, announced last month.
DiData said its offer valued Proxicom equity at $448 million, or a transaction value of $376 million taking into account cash on Proxicom`s balance sheet.
DiData has said it is looking to expand in the US and plans a series of acquisitions of network services and interactive-commerce companies. The company, which employs 4 000 network service engineers, is also considering a US listing for its shares.
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