New York July 31, 2001 iXL, which last week announced a joint offering with IBM, and Scient Corporation have entered into a definitive agreement providing for a strategic merger of equals. Scient and iXL will become subsidiaries of a new parent company headquartered in New York City and operating under the Scient name. Both boards have approved the transaction and approximately 34 percent of the shareholders of each company have agreed to vote their respective shares in favor of the merger.
In the transaction, each share of iXL and Scient common stock outstanding immediately prior to the effective time of the merger will be converted into the right to receive 0.25 and 0.31 of a share, respectively, of new holding company's common stock.
The transaction is expected to be accounted for as a purchase and is intended to be a non-taxable transaction to iXL's and Scient's shareholders. The merger agreement is subject to approval by both iXL's and Scient's shareholders and customary closing conditions, including the termination of Hart-Scott-Rodino Act waiting periods and effectiveness of new Scient's registration statement relating to the shares of common stock to be issued to iXL's and Scient's shareholders in the merger. The transaction is expected to close in the fourth quarter of 2001.
Scient has strategy and architect design experience, and by combining the engineering capabilities of both firms and leveraging iXL's development and implementation skills, the new Scient plans to have a broader and deeper range of solutions that addresses the needs of the market.
Bob Howe, chairman and CEO of Scient, will become chairman of the new Scient; Bert Ellis, Chairman of iXL, will become Vice-Chairman of the new Scient; Chris Formant, CEO of iXL, will assume the role of CEO; Stephen Mucchetti, COO of Scient, will become COO; and Mike Casey, CFO of IXL, will assume the role of CFO.
We are all very excited about our strategic combination with iXL, stated Bob Howe, chairman and CEO of Scient. What makes this strategic combination such a unique opportunity is that we can leverage both firms formidable capabilities. Furthermore, our two franchises are highly compatible both have demonstrated leadership, both are very committed to a high degree of client satisfaction and both have built their business on creating value for their client. We believe the combined entity can achieve a leadership position in the market.
Bert Ellis, chairman of iXL, stated, This merger has overwhelming strategic advantages but the expected financial synergies are even more compelling. We have already targeted over $100 million of anticipated annual cost savings by combining our two companies. For example, had our two companies operated as a merged entity for the June 2001 quarter, we believe we would have reported, on a pro forma basis, approximately $3 million of positive EBITDA versus an aggregate EBITDA loss of $27 million. The synergies to be gained will enable the new Scient to achieve profitability.