- The Washington Times - Tuesday, May 8, 2001

A South African computer services company has outbid Compaq Computer Corp. for Proxicom Inc., the Reston Internet consultanting and design firm.

Dimension Data Holdings PLC bid $448 million $7.50 a share on Sunday for Proxicom. The company's bid is 33 percent greater than Compaq's $336 million bid $5.75 a share on April 26.

Proxicom told Compaq on Sunday of the Dimension Data counter offer, and Proxicom's board of directors authorized the company's executives, legal advisers and financial advisers to negotiate with Dimension Data.

Proxicom executives declined to comment yesterday on the Dimension Data offer.

Proxicom likely will decide by the end of the week whether to accept the Compaq offer or the Dimension Data bid. If Proxicom decides the Dimension Data offer is better, Compaq will get three business days to match the bid.

And if Proxicom accepts the Dimension Data offer, it must pay $10 million to Compaq, according to the terms of an agreement.

A letter written Sunday from Dimension Data Executive Chairman Jeremy Ord to Proxicom founder Raul J. Fernandez and filed yesterday with the U.S. Securities and Exchange Commission indicates the two companies talked as recently as April 25 in Washington about a deal.

But Proxicom accepted an offer from Compaq the next day.

"As I am sure you can understand, we were extremely surprised when Proxicom announced its merger agreement with Compaq … we were disappointed that you did not give Dimension Data the opportunity to make a superior offer before proceeding with the transaction with Compaq," Mr. Ord wrote.

Proxicom has become an attractive acquisition target since its stock price has fallen. Reduced demand for the Internet design and consulting services it provides deflated its stock price, which hit $64 a share on Jan. 3, 2000.

Shares of Proxicom rose 34 percent on the Nasdaq Stock Market yesterday, closing at $8.20 a share.

Like Compaq, Dimension Data would pay cash for Proxicom.

The larger Dimension Data deal would net more money for Mr. Fernandez, the company's 34-year-old chairman and chief executive and a minority owner of the Washington Capitals. He stands to make $74.5 million if Compaq buys the company he started in 1991, and he would make $97.2 million if Dimension Data buys his company. He owns 12.9 million of the 56.9 million outstanding shares, or about 22 percent of Proxicom.

Money may be a significant criteria that Mr. Fernandez, the directors and executives at Proxicom use to determine which deal to endorse, according to Christopher Penny, senior analyst of Friedman, Billings, Ramsey investment bank.

"The fact that the share price is so much higher than the Compaq offer means Proxicom has a fiduciary responsibility to consider it," Mr. Penny said.

Dimension Data Financial Director Malcolm Rutherford declined to explain why the company bid so much more than Compaq.

"It would be wrong for me to comment on that," he said.

One reason may be the company's interest in capturing a share of the U.S. market. To that end, Dimension Data, a computer services firm in Johannesburg, spent $135 million in September to buy TimeBridge Technologies Inc., a computer network services firm in Lanham.

Dimension Data is South Africa's largest computer services firm and is traded on the London Stock Exchange. It has $1.4 billion in cash on hand and recorded sales last year of $1.9 billion, up from $1.1 billion in 1999.

But it pales in comparison to Compaq, 27th on the Fortune 500 list, which had sales last year of $42.4 billion and net income of $569 million.

Compaq declined to comment yesterday on the Dimension Data offer.

Dimension Data was unchanged on the London Stock Exchange, closing at $5.20 a share.

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