FRAMINGHAM (12/08/2003) - The roller coaster ride may finally be over for Web hosting customers of Cable & Wireless America, now that the company has announced the sale of its operations to a buyer that hopes to reinvigorate the business.
Reston, Va.-based CWA said Monday that it will sell its U.S. hosting business for US$125 million to an affiliate of Los Angeles-based Gores Technology Group LLC, which specializes in turning around distressed companies.
The sale, scheduled to be finalized in February, will close a tough chapter for CWA's parent company, Cable & Wireless PLC. London-based C&W spent $575 million to buy the U.S. operations as part of a deal with former hosting company Exodus Communications Inc. in November 2001 after Exodus went bankrupt, leaving customers unsure about where they would get services for their Web sites.
A year later, in November 2002, C&W announced a restructuring that cut back its U.S. operations and then in June of this year announced that it was seeking an exit strategy to leave the U.S.
"Customers now know the next step, and there's a process in place," said Chad Couser, a spokesman for C&W. "The buyer of the company is very experienced in turning around businesses like this, and they're deeply committed to making this work."
As part of Monday's announcement, CWA said it has filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the District of Delaware in Wilmington, Del. The Chapter 11 filing will allow the company to continue to operate and serve customers during the sale transition, according to CWA.
The agreement is subject to bankruptcy court approval. Under the provisions, Gores would pay C&W $50 million in cash upfront and $75 million later on.
The deal also includes a commitment for up to $100 million in debtor-in-possession (DIP) financing from C&W to maintain uninterrupted business operations as the sale continues. The DIP financing is also subject to court approval.
CWA also announced the appointments of John S. Dubel as the U.S. company's new CEO and Eric A. Simonse as CWA's chief restructuring officer and chief financial officer. Both are principals of AlixPartners LLC, a business turnaround firm based in Southfield, Mich.
"Today's actions provide a clear path to a much stronger organization," Dubel said in a statement. "Fulfilling the needs of our customers remains our No. 1 objective, and this sale represents a very positive outcome for them. Throughout the sale process, continuity of service will be maintained for our customers. CWA's products and market position are strong, its technology is leading-edge, and there is significant value in the core business."
CWA is also continuing with previously announced layoffs and other cost-cutting steps as the sale approaches.