UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE TO
(RULE 14D-100)
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OR 13(E)(1) OF
THE SECURITIES EXCHANGE ACT OF 1934
MERCATOR SOFTWARE, INC.
(Name of Subject Company)
GREEK ACQUISITION CORPORATION
ASCENTIAL SOFTWARE CORPORATION
(Names of Filing Persons--Offeror)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
712713106
(Cusip Number of Class of Securities)
SCOTT N. SEMEL, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
ASCENTIAL SOFTWARE CORPORATION
50 WASHINGTON STREET
WESTBOROUGH, MASSACHUSETTS 01581
TELEPHONE: (508) 366-3888
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Filing Persons)
COPIES TO:
LOUIS A. GOODMAN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
ONE BEACON STREET
BOSTON, MASSACHUSETTS 02108
TELEPHONE: (617) 573-4800
|X| Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
|X| third-party tender offer subject to Rule 14d-1.
|_| issuer tender offer subject to Rule 13e-4.
|_| going-private transaction subject to Rule 13e-3.
|_| amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the
results of the tender offer. |_|
-------------------------------------------------------------------------------
FINAL TRANSCRIPT
-------------------------------------------------------------------------------
CCBN STREETEVENTS
-------------------------------------------------------------------------------
CCBN STREETEVENTS CONFERENCE CALL TRANSCRIPT
ASCL - MERCATOR TO BE ACQUIRED BY ASCENTIAL SOFTWARE AND REPORT SECOND
QUARTER RESULTS
EVENT DATE/TIME: AUG. 04. 2003 / 9:00AM ET
EVENT DURATION: 1 HR 30 MIN
-------------------------------------------------------------------------------
CORPORATE PARTICIPANTS
ROY KING
Mercator Software - Chairman and CEO
KENNETH HALL
Mercator Software - EVP and CFO
MARK REGISTER
Mercator Software - President & Field Operations
JONATHAN COHEN
Mercator Software - VP Corporate Communications
DAVID ROY
Ascential Software - VP Investor Relations
PETER GYENES
Ascential Software - Chairman and CEO
PETE FIORE
Ascential Software - President
EILEEN BERGQUIST
Ascential Software - VP Human Resources
ROBERT MCBRIDE
Ascential Software - CFO
CONFERENCE CALL PARTICIPANTS
JOHN DIFUCCI
CIBC - Analyst
PATRICK MASON
Pacific Group - Analyst
JULIAN KIM
SG Cowen - Analyst
PETER TEICHMAN
Teichman Capital - Analyst
KIM HALL
Teichman Capital - Analyst
FRANK SPARACINO
First Analysis - Analyst
MARK MURPHY
First Albany - Analyst
PATRICK WALRAVENS
JNP Securities - Analyst
ANDY SCHOPICK
Nutmeg Securities - Analyst
ANDREW WARLOCK
Cumberland Associates - Analyst
MICHAEL WALDORF
Paulson and Company - Analyst
DAVE CAITLYN
Eric Data - Analyst
PRESENTATION
-------------------------------------------------------------------------------
OPERATOR
Hello and welcome to the Ascential Software and Mercator Software Joint
Investors' Conference Call. Following the presentation, there will be a formal
question and answer session. Instructions will be given at that time. At the
request of the company, this conference is being recorded. Now, I will like to
turn the conference over to Mr. Jonathan Cohen from Mercator Software. You may
begin.
--------------------------------------------------------------------------------
JONATHAN COHEN - MERCATOR SOFTWARE - VP CORPORATE COMMUNICATIONS
Thank you operator. Good morning, my name is Jonathan Cohen, I'm Vice
President of Corporate Communications at Mercator, and I want to welcome you
to the Ascential-Mercator joint conference call that covers two important
topics today. The first topic is Mercator's results for the second quarter of
2003. The second topic will be our joint announcement with Ascential Software
of the proposed acquisition of Mercator by Ascential. Mercator's Chairman and
CEO, Roy King, and Mercator's Executive Vice President and CFO, Ken Hall, will
make some brief comments, after which we will introduce Peter Gyenes, Chairman
and CEO of Ascential Software, who is with us here in Mercator's Wilton
offices today along with Bob McBride, Ascential's CFO, and David Roy,
Ascential's Vice President of Investor Relations. Also with us on the call is
Pete Fiore, President of Ascential Software. He is in Ascential's Westboro,
Massachusetts, office today. After the prepared remarks, we will open the
floor to questions. Before they begin, however, I would appreciate your
patience as I review customary language regarding forward-looking statements.
In connection with this conference call, the company wishes to take advantage
of the Safe-Harbor Provisions of the Private Securities Litigation Reform Act
of 1995 with respect to statements that may be deemed to be forward-looking
statements under the act. Such forward-looking statements could include
general or specific comments by company officials about future company
performance, as well as certain responses to questions posed to company
officials about future operating matters. The company wishes to caution
participants in this conference call, the numerous factors could cause actual
results to differ materially from any forward-looking statements made by the
company. Please refer to the risk factors included in the company's filings
with the Securities and Exchange Commission. Please note that in connection
with the adoption by the SEC regulation G and other rules affecting the use
and disclosure of non GAAP financial measures the company's financial results
described in this call are being reported both in GAAP and non GAAP measures
for purposes of comparing second quarter results with previous reporting
periods and other companies in our sector. And now I would like to turn the
call over to Mercator's Chairman and CEO Roy King.
--------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
Thank you Jonathan. Good morning and thank you for joining us. I hope everyone
has seen the last two press releases issued today; the first announcing that
we have agreed to be acquired by Ascential Software; the second announcing our
second quarter results. Before we review the results of the quarter, let me
express my unqualified enthusiasm for the acquisition by Ascential Software.
Enthusiasm that is shared throughout Mercator, the acquisition combines
powerful integration technologies into a single comprehensive platform that
represents true one stop shopping for our customers. It creates a global
leader in integration software, featuring approximately $250m in annualized
revenue, 3000 customers, a strong balance sheet, and a profitable operating
model for 2004.
This proposed acquisition would remove the cloud of uncertain corporate
viability that has hung over Mercator for the last 3 years. Additionally, it
will assure the continuity of Mercator's technology legacy of the very best
data transformation and routing and of innovative industry ready integration
solutions. It will also accelerate the growth of Mercator technology together
with Ascential. And it will provide greater service and support to our valued
customers and partners by strengthening the size of our sales, service, and
R&D functions. Let me now turn to the results of Mercator's second quarter.
-------------------------------------------------------------------------------
DAVID ROY - ASCENTIAL SOFTWARE - VP INVESTOR RELATIONS
Thank you, Roy. Our discussion this morning may include predictions,
estimates, or other forward-looking statement including statements regarding
the benefits that propose tender offer and merger, integration plans, and
expected synergies, effects on the business of the combined company.
Anticipated future financial and operating performance, and results including
estimates per growth and market reach and expectations for a price. These
statements are based on the current expectations of our respective management
teams. There are a number of risks and uncertainties that could cause actual
results to differ materially. For example stockholders may not tender the
shares or go in favor of the merger. Regulatory approvals may not be granted.
The integration may involve substantial cost and difficulties that may arise
in successfully integrating the business. Our business may suffer as a result
of the uncertainties surrounding the transaction. In addition, results may be
effected by the ability to expand our market share, growth rates in the
enterprise data integration software market; rapid technological change,
difficulties we may experience integrating technologies, operations, and
personnel of completed or future acquisitions, in general business conditions.
For more detailed review of the risks and uncertainties associated with each
company's business activity, see our respective reports filed with the SEC.
Either company undertakes any obligation to update its forward-looking
statements as a result of any change in events, conditions, or circumstances.
With that let me turn the call back to Roy King.
--------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
Peter, welcome to Mercator.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Thank you. Thanks a lot Roy. Thank you everybody for joining us. This is
obviously very exciting time for both of our companies and I might add for our
industry as well. We believe this combination that we are announcing today
creates a lot of benefit to customers in this highly strategic solution that
they seek for data integration and it creates what we believe is a powerhouse
vendor that is able to spark investments from customers because of the
differentiation of our solution in its high value and return on investments in
this very high priority area for IT. This is the area of data integration. We
are very pleased to announce that we signed this definitive agreement to
acquire Mercator.
Mercator, as many of you may know, is a leading provider of data
transformation and routing solutions that are designed for complex,
high-volume transaction processing environments and as such is highly
complementary to the offerings of Ascential. This acquisition, which a cash
transaction valued at approximately $106m, creates what we believe to be the
largest independent enterprise data integration software company with current
annualized revenue of approximately $250m and over 3000 customers. Most of our
company's offerings are well recognized and well regarded for their respective
capabilities, and Mercator's ability to address high performance, real time
complex data integration requirements are a natural complement to our
offerings at Ascential. Our combined technologies, distribution channels,
partnerships, geographic coverage, and skill sets expand the size and scale of
our company and allow customers to reply our comprehensive data integration
platform pervasively throughout their enterprise regardless of data volumes or
latency.
There are six strategic points that I would like to convey about the rationale
behind this acquisition. First is size and scale. Size and scale is critical
to be strategic to customers. It's critical in order to have the means to
executive and keep executing. It's critical to be able to be a factor in voice
in the industry. It's critical to be able to generate the leverage necessary
to keep growing profitably. And so this combination is a growth oriented move.
It is designed to create growth for the assets and accomplishments of both
Ascential and Mercator by virtue of this combination as it creates the largest
independent software vendor that is exclusively focused on enterprise bid
integration; $250m an annualized revenue over 3000 customers. Second strategic
point is scope of solution, scope of product offering and therefore real
differentiation in the value that is provided to customers and to partners. So
this combination creates the industry's first and most comprehensive product
set to support the full spectrum of data integration requirements across all
modes of customer's application environments; be it transactional, operational
and analytic, regardless of data sources of targets of volumes or of latency.
Third strategic point is talent, very often the winners are distinguished
mostly by the talent that they have and that they can apply to keep
innovating, to keep differentiation and to keep executing better than others.
So this combination extends and deepens our resources for technology
innovation, for creating more and continual customer value and for more global
reach and therefore more capacity to execute. Fourth strategic point is domain
expertise, the ability to show customers and partners how to apply our
offerings and therefore get quicker time to value. So this combination adds
solutions, expertise, customers and partners in key vertical markets including
financial services, healthcare, manufacturing, retail and distribution.
Fifth strategic point is visibility. We are in a large market seeking to serve
a substantial requirement that grows in significance and strategic impact on
customers. It's critical for a successful vendor to be substantial enough to
be given the opportunity to be visible and to be heard. So this combination
also alleviates the visibility and the strategic importance of our company, of
our combined company now within the enterprise IT community. And sixth, is
financial leverage, it is this leverage that enables the growth of
profitability, which in turn enables the investments that keep us strategic to
customers and that in turn builds sustained shareholder value. So this
combination certainly is expected to leverage Ascential Software's business
model by accelerating profitability and growth, by providing accretion to
earnings, while retaining substantial financial resources. All of our
constituencies' customers, partners, employees and shareholders benefits from
this combination and the benefits begin essentially right away.
Mercator customers' can benefit from Ascential scaleable suite of data
profiling, data quality, transformation, and meta data management as well as
from our real time integration services that enable on demand data integration
inline with virtually any business process. This is the capabilities that we
announced last month. Ascential customers can benefit from Mercator's
expertise and transaction oriented data transformation and routing, the
Mercator inside integrator product with Mercator's specific industry ready
integration solutions and Mercator's very well regarded and powerful adaptors
for an extensive universal platforms. These capabilities for Mercator are
integrated with Ascential suite, through the Ascential real time integration
services that we announced last month. And all of our customers and partners
of course benefit from the substantial scale and stability in global resources
that result from the combination of our two companies.
The employees benefit from being part of a dynamic growth oriented engine and
from all the career development opportunities and the exciting accomplishment
opportunities that all that represents. This enables us of course to attract
and retain the best and we believe in this combination we have a lot of the
best today. Shareholders of course have the potential to benefit from the
leverage that's created by this combination, the expected accretion within the
first year of combined operations and the expected continued profitable growth
from a much strengthened and more substantial vendor in a very substantial
market. We are obviously very excited and very enthusiastic about this
combination about our position for the future and we're also anxious to get to
your question, so let me now turn it back to Roy.
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
Thank you Peter and I look forward to working with you on the transition as we
combine our two companies; let's open the call to questions.
-------------------------------------------------------------------------------
DAVID ROY - ASCENTIAL SOFTWARE - VP INVESTOR RELATIONS
Operator.
QUESTION AND ANSWER
--------------------------------------------------------------------------------
OPERATOR
Thank you, at this time we'll begin our formal question and answer session. If
you would like to ask a question, you may do so by pressing "" "1". To
withdraw or cancel your question simply press "" "2". Once again that's ""
"1", if you have a question. Our first question will come from John Difucci
with CIBC.
--------------------------------------------------------------------------------
JOHN DIFUCCI - CIBC - ANALYST
Hello,-- quick question for Peter.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
[inaudible].
-------------------------------------------------------------------------------
JOHN DIFUCCI - CIBC - ANALYST
Peter, we've heard a lot about the, I guess, synergies between process
integration which is pretty much what Mercator does in data integration which
is what Ascential does, and I am wondering if that's more just talk at this
point or conjecture or is this real? Is this what your customers are demanding
or asking for and, I guess, I apologize because I don't know if Ascential
[rules] very well but one of the things with process integration that seems to
me is very important is not just data integration but data integrity, and do
you have products that address that problem?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Okay, I'll take the second question first because it will help to answer the
first question. Our products address the full spectrum of what we call data
integration, which of course, includes the capability to ensure that the data
that flows through the process is properly integrated and consists of the --
and has the quality attributes that enable it to fit the purpose that it's
intended to be used for. So, very often the issues of data in an enterprise is
that they are brought together from different sources that are disparate from
one another; they have inconsistencies; they have an accuracies which have to
be cleaned up in the process in order for the data and the information to be
integrated together. This is the key feature of our capabilities and this is
the key feature that is required in virtually all kinds of integration
solutions, and this is highly complimentary to the capabilities of Mercator.
The first part of the question that you asked -- the first part of the
question that you asked had to do with.
-------------------------------------------------------------------------------
JOHN DIFUCCI - CIBC - ANALYST
It had to do with -- I mean, we were hearing a lot about process integration
and data integration and how they are very complimentary.
--------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Right.
--------------------------------------------------------------------------------
JOHN DIFUCCI - CIBC - ANALYST
But hearing it versus you actually seeing demand from your customers' saying I
want both from you. Is that real?
--------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
That is very definitely real. Our customers are telling us that the principle
integration issue that they face. And sometimes you have to, sort of, expand
the conversation a little bit to get pass the jargon. The principle issue that
our customers face is the requirement to bring together disparate elements of
data that come from different places in the enterprise and bring it together
to make it useful information. And when customers use jargon of application
integration, process integration it all ultimately comes then to ensuring that
the elements of data that comes from the different operational areas of the
Company are brought together to make some cohesive sense to support the
information or purpose as required. So, it is -- it really is all about being
able to bring together disparate elements of data into cohesive usable
information to fulfill whatever the business processes that the customers'
trying to fulfill.
-------------------------------------------------------------------------------
JOHN DIFUCCI - CIBC - ANALYST
Okay. Okay. And, I guess, a quick question for Roy. Mercator has been in this
business for a long time, longer than pretty much almost to anybody. It seems
-- I'm just curious as why you think integration software seems to be
languishing more than other areas of software in this environment. Is it a
reduced priority or belief in the benefits of integration? Or is this
something else happening here? And you guys obviously made a decision to -- I
don't want to say [thrown the towel] -- aligning with someone else to become
like a stronger, but you made the decision to stop being independent here, so
just curious what your thoughts are?
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
Okay thanks. Thanks John. I do think that the integration needs of our
customers and in the industries we serve remains extremely high. I think the
whole IT spending environment though especially since 9/11 and the other world
events has certainly put a damper on that IT spending. Just as an example, I
had mentioned to you and the investors on our last call that we had some deals
that had slipped from first quarter and I can tell you that we were able to
close most of those; however, a lot of the deals again ended up much smaller
than we had originally, you know, -- originally forecasted. So, it's clear
that while the customer needs -- if the integration remained high, they are
carefully scrutinizing the degree of spent. As you indicated, Mercator has
been around in this business for about 18 years and we've got 1100 customers
and these three corners stones that we have tried to make articulate our
strategies around; one is providing them with the best of breed core
integration technology. You know, that's Mercator's bread and butter and
across the robust set of adaptors, across many platform servers and business
systems; the second foundation has been to solve specific industry-based
integration challenges in those industries that we serve and areas like [HEPA]
and straight through processing, you know, swift, all those have been
important to the total portfolio. And we embarked on a program to work closely
with our [SIN] technology partners that would provide what I think is high
value and high volume integration software products to, you know, to our
mutual customers. That, you know, we have been facing a lot of questions the
last 3 years about our corporate viability. So, the decision to combine with
Ascential, we believe eliminates that corporate viability issue and really
provides significant growth opportunities for the future and that's the basis
for. We can continue to, you know, to cut our way to success. We need to make
the right set of combinations to better serve our customers or partners and
take advantage of those growth opportunities in the future.
-------------------------------------------------------------------------------
JOHN DIFUCCI - CIBC - ANALYST
Okay. Just a quick follow up. And, if you believe that the priority for
integration still remains highs and demand remains high could the relative
high ASP for an integration software solution, could that be, I don't want to
put words in your mouth, but could that'd be one of the issues that seems to
be holding it back at least relative to the rest of software and most of
software?
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
You are talking about the recent relative decline in the ASPs --.
-------------------------------------------------------------------------------
JOHN DIFUCCI - CIBC - ANALYST
No. I am talking -- I mean the relative. Oh, yes that's part of the outcome
too, but it seems to me that the ASP for an integration software solution is
relatively high. If you include in it the implementation cost which are, you
know, pretty significant with every projects that went off and then looking at
it that way even if it is a high priority in a difficult environment it seems
to me that perhaps people are not just going to be buying it at least not at
this time even if it is high priority. Does that make sense to you I guess?
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
Well I think if you look over period of time of Mercator's products for the
last 2.5, the ASP has actually has increased from where we were before, we had
a more broader portfolio which included our industry integration solutions. We
were -- the average deals were around 40,000 or 50,000, and I don't think that
is limiting the reason why you know decision makers have reduced their
spending on integration. It still remains a high priority. I think that this
combination actually allows us to put a greater breadth product portfolio
serving the integration needs of our customers and again tailoring the things
to -- tailoring our solutions to those particular industries. So Peter do you
have --?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Yes, if I could just add a comment here. I think the issue here for customers
is that they are perpetually seeking to integrate systems and the sources of
information. And over the last several years there have been a number of
technologies that have been introduced into customer environments to address
those requirements, as those requirements of above. And of course over the
last few years those requirements have been exacerbated by huge amounts of
data and a wide variety of data sources being introduced into the environment.
And this has been very, very challenging to bring it all into some kind of
cohesive information source. So, what we've been able to develop and what we
perceive is really the strong foundation now for a whole -- new level of
benefit to customers is the ability to bring a rather complete end-to-end
approach. The issues -- underlying integrating data sources for purposes of
providing an integrated and holistic view on the various aspects of the
business those customers wish to have and integrated holistic view about. And
that requires a fairly broad range of functionality but the range of
functionality that all works together in a tight fashion that represents
leverage for the customer. And therefore represents leverage for the
customer's investment not only the new investment that we are asking the
customer to make, but significant leverage on previously made investments. And
that's the big win here. That's the big win for customers and that's' the big
win for us now as we get to leapfrog the traditional approaches of a little
bit of integration solution for this kind of integration and a little bit of
integration solution for that kind of integration. Because when you think
about it every piece of these integration modes all rely upon the underlying
data and the underlying data flows being rationally brought together for
purposes of meaningful information. And that is the capability that Mercator
had set up to provide from it's vantage point and that is the capability that
Ascential has set up to provide from it's vantage point and now by combining
these two companies and the tremendous assets. We now are able to create a
real powerhouse that can provide some real leadership here in the industry to
provide the kind of integration platforms that customers really want and
really need.
-------------------------------------------------------------------------------
OPERATOR
Thank you, our next question will come from Patrick Mason with Pacific Group.
-------------------------------------------------------------------------------
PATRICK MASON - PACIFIC GROUP - ANALYST
Yeah, just trying to get a little clarification on some of these -- some short
data points here, so I guess as far as the integration plans are concerned,
speaking of integration, as far as integrating the two companies, could you
talk about, you know, you are going to move some employees from [Connecticut]
can I guess [to Mass.] or you know, what's going on from a dynamic standpoint
on that front? Are they going to keep the employee base where they currently
are?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
We are going to integrate the two companies; we're going to integrate
facilities wherever possible. Mercator has a complementary R&D facilities and
product development facilities in Reston and [Boca Raton] and in London and of
course we're going to keep those in place. The G&A facilities here in Weston;
well after an appropriate amount of time be integrated into our headquarters
in [Westboro] Massachusetts.
-------------------------------------------------------------------------------
PATRICK MASON - PACIFIC GROUP - ANALYST
Okay, and then just on the technology integration front, you mentioned that I
guess, seems like you already have a connector with real time. Can you talk a
little bit more what has to happen on the technological integration for the
two products to become more cohesive?
-------------------------------------------------------------------------------
PETE FIORE - ASCENTIAL SOFTWARE - PRESIDENT
Yes, hi, Patrick this Pete Fiore
-------------------------------------------------------------------------------
PATRICK MASON - PACIFIC GROUP - ANALYST
Yes.
-------------------------------------------------------------------------------
PETE FIORE - ASCENTIAL SOFTWARE - PRESIDENT
Good morning. First of all as Peter mentioned, [I believe he] mentioned, the
customers today can immediately use both products in a [inoperatively] through
our real time integration services capability, so we can take transactions in
real time, we can run them through our data quality and data integrity
components of our suite and we do all that in real time. You can also see
those transactions into an environment where, for example, customers' want to
combine transactional information with historical information kind of an
operational data store or a data warehouse environment. So that happens
immediately, the strategy that was used going forward will be similar to the
strategy we'd used with past acquisitions where we have overtime, we determine
where the best points of integration are, where the best features of each
product set are in -- and overtime integrate those -- they are all consistent
with our product vision of having a single unified data integration platform
that supports services oriented architectures and [inoperablility] with
existing technology.
-------------------------------------------------------------------------------
PATRICK MASON - PACIFIC GROUP - ANALYST
Okay, so it sounds like that integration risk is minimal, I guess from a --
whatever from an acquisition standpoint. As far as just your sales force is
and the models; how are they different versus how Ascential currently operates
and what kind of [inaudible] address there as far as the risk?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
The sales forces are very-very complimentary. Both companies of course are in
the business of integration and data integration, I might add, though I think
the skill sets are very complimentary. Our intention is to just blend the two
together and prepare for growth.
-------------------------------------------------------------------------------
PATRICK MASON - PACIFIC GROUP - ANALYST
How many sales guys does Mercator currently have?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
I think Mercator has approximately 30 [quota carrying] sales people.
-------------------------------------------------------------------------------
PATRICK MASON - PACIFIC GROUP - ANALYST
And did that quota, I guess just based on the product they sell differ from
the [quotas] that Ascential currently uses?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
The quotos are essentially the same this year.
-------------------------------------------------------------------------------
PATRICK MASON - PACIFIC GROUP - ANALYST
Okay and, I guess just from your stand it is going to be an accretive
acquisition. It looks like Mercator is basically $22m -- I mean $88m run rate.
So, when you talk -- and just get a build a model obviously. So, I just wanted
to get a little more color on maybe how you get to the accretion? Is that
based on you could just maintain that type of run rate or do you expect to
actually grow with that to be accretive to just kind of, to give a little more
flavor of what's going on?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Yes, I guess the way we look at is that as soon as this transaction closes we
expect the two company operations to be essentially, completely, and fairly
rapidly totally integrated together into one seamless company, and that's very
realistic to do because, you know, the core competencies and the flavor of
every function of our respective companies are very similar, very
complementary to one and other. So, we believe that operationally we are going
to be integrated into one company rather quickly, upon closing this
transaction; and we think our customers will quickly be presented with an
expanded product offering, and the Ascential customers will represent very
significant cross-selling opportunities; Mercator customers will represent
very significant cross-selling opportunities. So, I think the way we look at
it is that if you look at the increased revenue expectations for '04, we would
say that this combination adds somewhere in the order of 90-100m of revenue to
Ascential by itself. The issue really here being were the opportunity rather
here really being that -- as a combined and enlarged company our expectations
for '04 not only go up by that level of size, but of course with that level of
size we expect to have quite a bit more leverage on our operating model.
-------------------------------------------------------------------------------
PATRICK MASON - PACIFIC GROUP - ANALYST
Okay.
-------------------------------------------------------------------------------
OPERATOR
That you, our next question will come from Rehan Syed with SG Cowen.
-------------------------------------------------------------------------------
JULIAN KIM - SG COWEN - ANALYST
Hi this is Julian Kim (ph.) on behalf of Rehan.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Hi.
-------------------------------------------------------------------------------
JULIAN KIM - SG COWEN - ANALYST
Couple of quick questions first, looks like Mercator was running on a
maintenance run rate of around $40m a year, what sort of impact do you think
that will take when you've to write-off some deferred when you combine the two
companies?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Yes. We think -- that whatever that impact is it will be in the first couple
quarters of combined operations, and we think it might be somewhere in the
order of about a half of Mercator's current maintenance run rate.
-------------------------------------------------------------------------------
JULIAN KIM - SG COWEN - ANALYST
Okay.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
But will be over after this second quarter's combined operation.
-------------------------------------------------------------------------------
JULIAN KIM - SG COWEN - ANALYST
Oh is there a lot of seasonality in Mercator's contract renewals, is that why
you think you'll get back to normal within a couple of quarters?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
There's a [inaudible] have been a lot of seasonality for Mercator contract
renewals, but are now -- this is the moment says that, that's kind of the way
it will [pan-up].
-------------------------------------------------------------------------------
JULIAN KIM - SG COWEN - ANALYST
Okay, and Roy just, can you get a sense now that financial viability really
isn't a worry for Mercator customers, what sort of short term impact do you
think you'll have in terms of you know revenue or number of deals signed?
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
Well I can tell you the pipeline you know continues to reflect significant
opportunities and we have a -- plan to reach out to our customers and partners
and explain the benefits that they will receive from this combination. And
hopefully that will go a long way to ensure that we have that customer base
going forward. For me to sit here and try and predict what they're going to do
I wouldn't want to be in that position, but I can tell you we are going to do
everything that we possibly can to show the strength of this combination.
-------------------------------------------------------------------------------
JULIAN KIM - SG COWEN - ANALYST
Fair enough and just kind of the big picture question. Mercator kind of
focused -- kind of on the core transaction integration and kind did the
integration side, where as the rest of the EAI company seems to full access of
the better term move up the products stag. Are you going to take the resources
you have now available to your self to try to move up the products like the
other the EAI guys and compete with the dead head on the with the [sibions]
and the web message and [sibcos] of the world. Or are you going to use some
Mercator technology basically to -- in the context of what you are really
doing in the data innovation side?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
I was really hoping somebody would ask that question I got to tell you. You
know you probably heard us say many, many times that the secret [sauce] in our
mind for successfully integrating business operations and successfully
integrating at the IT level is all about integrating data. And that's our core
competency -- that's the core competency of Mercator. And that in our mind is
the foundation for the kind of solutions our customers are looking for when
they speak about integration. So, for us this is critical differentiator-- for
us this is critical to the value that we provide the customers and what this
combination provides us if it gives us a way to provide the complete spectrum
of data integration across all the different business processes needs of
customers. And that's our focus. Now, you know, customers out there have many
different EAI platforms. You know customers out there have ultimately
different business process integration platforms, different [apt] servers.
Whatever they are using they need a data integration solution that brings
together all the [discrete] sources in all the different environments and
latencies that may be required. And that's our special focus and that's the
special added value that we bring to it all and we expect whatever these other
EAI guys do, we expect to be completely complimentary and provide the data
elements necessary for customers to be successful with their integration
needs.
-------------------------------------------------------------------------------
JULIAN KIM - SG COWEN - ANALYST
Thank you.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Thank you.
-------------------------------------------------------------------------------
OPERATOR
Our next question will come from Peter Teichman (ph.) with Teichman Capital.
-------------------------------------------------------------------------------
PETER TEICHMAN - TEICHMAN CAPITAL - ANALYST
Hi guys. Conceptually, I have no problem with this deal. It's a great deal for
Ascential, but taking into the Mercator has 65 cents a share in deferred
revenue, 35 cents a share in net cash, Ascential is basically buying Mercator
at less than one time current sales annualized in the current depressed run
rate and my question is why such a low sale price?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Okay we were just thinking whether who should answer that as the buyer or the
seller?
-------------------------------------------------------------------------------
PETER TEICHMAN - TEICHMAN CAPITAL - ANALYST
Obviously the seller. I understand your point of view. Okay -- I mean this is
-- I don't have any data points, just seeing transactions this low, and I am
just curious if the bankers saw them because I have never seen one software.
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
I can assure you that from Mercator's perspective that as we evaluated our
strategic alternatives and worked closely with the bankers and looking at
other alternatives to this as well as our organic plan that [fairness] opinion
that was rendered by JP Morgan in this process was just that and was highly
supportive of the transaction. And I'm sure that as Peter and his Board Of
Management team that he did the same. I'll let him comment, but this was
viewed to be, you know, where we are and where we were going to be the right
thing to do at this time.
-------------------------------------------------------------------------------
KIM HALL - TEICHMAN CAPITAL - ANALYST
If I may just add, this is Kim Hall. Peter, let me assure you that we're going
through a very thorough market process there with JP Morgan had contacted over
a dozen potential parties, it was a competitive process. There was interest
expressed by multiple parties and we did go through a competitive situation.
We think that this is an appropriate evaluation of where the company is at
this point in time.
-------------------------------------------------------------------------------
OPERATOR
Thank you Wilson. Our next question will come from Frank Sparacino with First
Analysis.
-------------------------------------------------------------------------------
FRANK SPARACINO - FIRST ANALYSIS - ANALYST
Hi guys. First question on the Ascential side. Bergquist, what the impact will
be on your
IBM relationship.
-------------------------------------------------------------------------------
EILEEN BERGQUIST - ASCENTIAL SOFTWARE - VP HUMAN RESOURCES
Well, we think the impact on the IBM relationship will be a positive one. Our
relationship with IBM is centered around our strength in data integration that
complements the IBM offerings and we believe this combination strengthens our
data integration capability. So, we expect our contribution to IBM Solutions
that IBM provide to its customers to be strengthened as a result of this.
-------------------------------------------------------------------------------
FRANK SPARACINO - FIRST ANALYSIS - ANALYST
Peter, I know your relationship has been more on the data management side with
IBM, but from a Web Sphere perspective, you know, in sense, given this move is
more competitive in their mind?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
No, I really don't think so. We've been working with the Web Sphere group
since we announced the real-time integration services last month. I mean, we
have been working with them before, but in particular on that particular
capability that brings our data integration elements of functionality right
into the Websphere and [WBI] world and Mercator, as a matter of fact, has been
a partner of IBM around the Websphere MQ for a long, long time. It's a
principle messaging platform that is used by Mercator and by Mercator
customers. Given the expanded footprints, if you will, of now the expanded
Ascential software world are expanded data integration capabilities. We have
even more reason now to incorporate IBM technology at the messaging level, IBM
technology at the business process levels and these are all things are of
great interest to the IBM Websphere group. So we would expect it to be.
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
Let me just add two short points; Peter's comment earlier that our combined
technologies are complementary to our technology partners is a very positive
one. Not only is it complementary with IBM, but you know what we have done
with Sun, Lawson, BEA, and others and that will -- as I understand it from
Peter, remain a very important element. And relative to IBM, were used within
IBM retail and IBM itself as a Mercator product, so I think it certainly not
only strengthens the combined technologies with IBM, but with other technology
partners as well.
-------------------------------------------------------------------------------
FRANK SPARACINO - FIRST ANALYSIS - ANALYST
On the Mercator side, if you look at your last quarter, who is the number one
competitor for you in this selected verticals that you are focused on?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
It hasn't changed from prior quarters. We continue to see mix of players;
those players include, those players includes, [CIDCO], [WebMethod], the
internal IT department where they try to do it themselves. Obviously, [we
don't thin is appropriate], since we know how things operate, certain parts of
IBM, obviously, we do occasionally touch on it as well. So, that's the short
list of players that we continue to see in the market.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
If I --
-------------------------------------------------------------------------------
FRANK SPARACINO - FIRST ANALYSIS - ANALYST
Yes.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
If I may just make a comment here, I think it's important to note that from
the customers advantage point, and I think the evidence to this, we at least
in our travels around customers find really overwhelming all over the world,
and the customers advantage point here; their prospective on their integration
needs and their priorities [and the] appropriate technologies with which to
address it is in, you know, a major change of change, and the drivers of those
-- the drivers of that change have a lot to do with technologies like web
services and like messaging standards, which tend to make less complex and
less dependent on outside sources, and make more standardize those aspects of
their requirements and therefore turn their focus on the things that really
interfere with their ability to get the kind of complete view of their
business and of their operations that they seek; and that is really all about
the issues that have to do with moving data around, with cleaning data, with
integrating data sources, with dealing with the huge amounts of data volumes
in very, very short period of latency. And that's all about the capabilities
that helped them develop over the years at Mercator and at Ascential.
This is particularly challenging to those who have the traditional integration
broker capability but don't really have the means inherent in their offerings
to deal with the substantial volumes of data and the substantial complexities
of the transformations that are required to be performed in very small
segments of time in order to accomplish the solutions that they need. So,
there is a lot of change going on here, and our objective here is to increase
the footprint that we have in the industry with which to address that change
and bring solutions that, we think in a very unique way, address the priority
requirements then.
-------------------------------------------------------------------------------
FRANK SPARACINO - FIRST ANALYSIS - ANALYST
And may be two more quick questions. One related follow up on that, Peter, is
if you look at some of the other key AI players like [CIDCO], WebMethods have
they historically been partners and prior unit deals? And how do you look at
that going forward given this move obviously alienates that group of vendors?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Well, you know, with regard to whether or not it alienates that group of
vendors, I am not so sure about that because I think that if you look at the
requirements of the customers, of, you know, -- I mean, I will use the term
the traditionally AI vendors, if I may, then at least what we find is that,
you know, they may be perfectly happy with the functionality they are getting
from the platforms previously provided by those vendors, but their issues
going forward all seem to have to do or seem to largely have to do with data;
moving data, integrating data, cleaning data, and making the outcome of those
processes available to various elements of their business process, some in
real-time some in near real-time, again all different latencies. So, our
positioning here is to provide those capabilities and to provide it in a
fashion that is [inoperable] in appropriate respects with the platforms that
customers have from [CIDCO or CBN] or -- from -- or WebMethods or whatever.
-------------------------------------------------------------------------------
FRANK SPARACINO - FIRST ANALYSIS - ANALYST
Okay. Lastly, just -- have you quantified accretion at all in any time period?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
We believe that in the first quarter of combined operations that this is going
to be somewhat dilutive and that's largely because of the effect of the
purchase accounting effect on the differed revenue from maintenance. We
believe shortly after that it will begin to be accretive and we believe that
in 2004, this combination will be nicely accretive.
-------------------------------------------------------------------------------
FRANK SPARACINO - FIRST ANALYSIS - ANALYST
Okay good luck guys, thanks.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Thanks a lot.
-------------------------------------------------------------------------------
OPERATOR
Thank you. Our next question will come from Mark Murphy with First Albany.
-------------------------------------------------------------------------------
MARK MURPHY - FIRST ALBANY - ANALYST
Thank you, Peter, Ascential has been very successful so far integration both
Vality and Torrent on a, now on a revenue basis. It looks like you are merging
two companies with some what comparably sized revenue streams, can you give us
anymore detail on how you plan to handle the sales force integration and
specifically the splitting up of the territories and account designations?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Sure. Between the closing and the end of this calendar year, depending a
little bit on exactly when the closing is which is little hard to be precise
about right now, but just making some assumptions that, that will close well
before the end of the year of course, we are going to integrate all the field
operations, but we are going to keep the missions of the respective sales
teams of Ascential and Mercator focused on their missions of today. But it
will all be under common senior management. As we are go into the new year,
the territories will be bonded together, the individuals will be completely
trained and equipped to represent a full product line of the newly expanded
Ascential. And the consequence of all of that is that we are going to have a
sales force of [quoto] carrying individuals of somewhere between 90 and a 100
from the beginning with line management in the field that is well equipped,
well seasoned, well prepared to manage that group with a technical support
group and professional services group deployed around the world that is
equally well equipped and well resourced and well able to support that group
and the customers. And the reason that we believe that's the appropriate
strategy is that, we believe that this combination basically takes two highly
compatible data centric oriented offerings.
One was a tradition and a focus on data warehousing and analytical support and
the other was a tradition and focus on operational and transaction support and
bring it together into a cohesive platform solution, expands the requirements
of customers across all these different styles of volumes and latencies.
That's what our customers tell us they want, that's what we believe makes more
sense and in terms of knowledge and skill sets and support resources to
succeed in bringing all that to the market place and supporting customers, we
believe that's Ascential has the same skill set, the same profile, and that's
what we believe we are combining here. So we think we have a high degree of
compatibility of readiness, and of culture, and of capability.
-------------------------------------------------------------------------------
MARK REGISTER - MERCATOR SOFTWARE - PRESIDENT & FIELD OPERATIONS
Peter trying to make a one quick point there. Peter--
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Yes, go ahead please.
-------------------------------------------------------------------------------
MARK REGISTER - MERCATOR SOFTWARE - PRESIDENT & FIELD OPERATIONS
This is Mark. Just regarding specifically your comment about you know how we
could bring this people together in splitting up territories. One of the
really highly complimentary aspects of this is if you look specifically into
the territories there is a lot of really good synergy in terms of where
territories that we felt were under covered by our sales force are turned out
to be places where Mercator has good representation of good geographic
coverage. So the challenge of -- you know, feeling like we have overlapping
sales people in sorting our territories actually turns out to be a plus here
because in general we are going to have sales people coming with the company
in territories where we were looking to hire people anywhere. And it will also
build up in some places internationally where we were looking to build
additional sales people [on] and we are going to get more critical mass. So, I
think that aspect have actually turned out to be a very positive thing rather
than issue for us to deal with.
-------------------------------------------------------------------------------
MARK MURPHY - FIRST ALBANY - ANALYST
Okay Peter. I wanted to do a little more drill down on the timeframes here for
dilution and accretion. I heard your comment about Q1 being dilutive and then
historically after that accretive.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
No I didn't say Q1; I said the first quarter is that we have a combined
operation.
-------------------------------------------------------------------------------
MARK MURPHY - FIRST ALBANY - ANALYST
Right. Sorry, that's how I should have phrased that. Could you walk us through
the progression of the subsequent quarters of combined operations and detail
whether those would be dilutive or accretive and perhaps give us an estimate
of the dilution in the first quarter of combined operations.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
I will give my best. I would say that the second quarter of combined operation
will kind of be on the fence, and after that it will continue to be accretive
and escalate quarter after quarter. And '04 will be as I said before is nicely
accretive.
-------------------------------------------------------------------------------
MARK MURPHY - FIRST ALBANY - ANALYST
I guess that for the first quarter of combined operation is safe to assume a
few cents per share of dilution?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
It will be a little bit diluted. It's going to depend upon -- it is largely
dependent upon the affect of purchase accounting on Mercator's deferred
revenue.
-------------------------------------------------------------------------------
MARK MURPHY - FIRST ALBANY - ANALYST
Okay then a question for Mercator what is your current level of NOL carry
forwards and then to what extend should we expect that those NOL's can be
acquired and recognized by Ascential?
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
I will answer the first part and I will let Ascential answer the second part
of that. We've got a multi-million dollar NOL; obviously that NOL is dependent
upon purchase price and variety of things. It is anticipated that there is
clearly significant NOL announced that is available to be realized by
Ascential.
-------------------------------------------------------------------------------
ROBERT MCBRIDE - ASCENTIAL SOFTWARE - CFO
As far as how it will affect, this is Rob McBride. As far as how it will
affect our operations. You know there are limitations that to how much NOL you
can take in the given year. Our expectation at this point is going to be
somewhat less than $5m a year going forward in that range.
-------------------------------------------------------------------------------
MARK MURPHY - FIRST ALBANY - ANALYST
Thank you.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Thank you Mark.
-------------------------------------------------------------------------------
OPERATOR
Thank you. Our next question will come from Patrick Walravens with JNP
Securities.
-------------------------------------------------------------------------------
PATRICK WALRAVENS - JNP SECURITIES - ANALYST
Hi, thank you. I guess that one question is if you could tell me some examples
that you have of larger customers that are currently using both products?
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
Okay, Pete.
-------------------------------------------------------------------------------
PETE FIORE - ASCENTIAL SOFTWARE - PRESIDENT
Yeah, we have, you know, few examples across a few industries. One in
particular is ABN AMRO Bank; [AIG] is the joint customer; Pfizer is the joint
customer; General Motors is the joint customer. So, I think there is a
reasonable number of customers out there Patrick that -- are using both
technologies, and at the same time, I think we have a really pretty
significant opportunity for cross selling into each others respective customer
bases.
-------------------------------------------------------------------------------
PATRICK WALRAVENS - JNP SECURITIES - ANALYST
Okay, now, and then second Peter, can you -- you have already been asked this
in a number of different ways but here is one more. Can you talk what you
think the range of cost savings is likely to be in dollars in 2004?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
I think it's going to be in the order of -- if you do it from the run rate, we
think the actual cost synergy is going to be in the order of about $20m. We
are going to realize most of that in the first half of '04.
-------------------------------------------------------------------------------
PATRICK WALRAVENS - JNP SECURITIES - ANALYST
Okay great, thanks very much.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Thank you.
-------------------------------------------------------------------------------
OPERATOR
Thank you. Our next question will come from Andy Schopick with Nutmeg
Securities.
-------------------------------------------------------------------------------
ANDY SCHOPICK - NUTMEG SECURITIES - ANALYST
Most of my questions have been answered. I just do want to make this comment;
however, in response to only the questioners. Of course, I look at it as a
financial analyst from a somewhat different perspective, you are acquiring a
company with a huge accumulated deficit, a negative tangible network, many of
the comments you've made, Peter, in response to these questions are really
based on certain assumptions that are extremely unclear at this time in terms
of what the acquiescent, if any, will be and whether or not the hope for
financial leverage will be achieved? Do you intend, Peter, to issue amended or
adjusted guidance to the financial community given the comments coming up in
your conference year call in view of this event?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Yes. When we have our third quarter conference call, of course, we'll update
everybody on where we are at that time. I just want to point out though that
the -- our expectations are based on a couple of significant principles that I
think are worth repeating. Principle number one is that we believe that
customers will benefit a lot from the expanded offerings that are now
available through this combination and that's a belief based upon our daily
interaction with our customers Ascential Software and on the belief of
Mercator's daily interactions with their customers as Mercator. We believe
that the issues that have been effecting Mercator; issues that this
combination addresses rather straightforwardly and rather quickly as a
combined company, there really can be little question about our viability. The
question really is can we do a very good job for customers? And can we do it
better than the customer's alternatives? And that's a challenge that we look
forward to each and every day and we have been very gratified by the reactions
that we have been getting from customers, we got capabilities as independent
companies and we're confident as combined companies the customers are going
to, you know, I mean, I hate to sound funny about this, but I think the
customers are going to stand up and cheer because the customers of Mercator --
Mercator is the Company with 18 years of very, very rich and successful legacy
with respect to helping customers achieve their objectives and the use of
Mercator's products.
They are wonderful customers who were doing very, very exciting things with
Mercator's platforms, and these things fit perfectly into the strategy of
Ascential and complement our existing solutions at very, very well. When you
combine that with the skills that are inherent in Mercator and you put it
together with Ascential and you take away the question marks of viability and
you now focus on a company with quarter of a billion dollars of current
annualized revenue with a model that has every opportunity to be profitable
rather quickly with a substantial balance sheet, with tremendous customers who
in, my opinion, have a very high regard, over the solutions and the
technologies that they're using today from both Mercator and Ascential and
customers who were recognized by the combined offerings of these two companies
rather that the offering now of the combined company is exactly in line with
what they have been telling each of us they want and they want more of. So,
these are the reasons why we believe this business model will ultimately be
successful, and these are the reasons that underlie this combination.
-------------------------------------------------------------------------------
OPERATOR
Thank you. Our next question will come from Andrew Warlock (ph.) with
Cumberland Associates.
-------------------------------------------------------------------------------
ANDREW WARLOCK - CUMBERLAND ASSOCIATES - ANALYST
My questions were answered. Thank you, good luck guys.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Thank you very much.
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
Thank you.
-------------------------------------------------------------------------------
OPERATOR
Our next question will come from Michael Waldorf (ph.) with Paulson and
Company. Michael Waldorf (ph.), your line is open.
-------------------------------------------------------------------------------
OPERATOR
Our next question will come from Dave Caitlyn (ph.) with Eric Data (ph.).
-------------------------------------------------------------------------------
DAVE CAITLYN - ERIC DATA - ANALYST
Thank you, Roy can you hear me?
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
Sure, I can Dave, how are you?
-------------------------------------------------------------------------------
DAVE CAITLYN - ERIC DATA - ANALYST
Not very good. Let me ask some questions, if I may, relating to whether there
was a break -- any breakup fees or any penalties associated with this deal?
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
As the standard conditions around all that the offering documents have been
filed -- will be filed as tender offer comes up and you can read all the
details there but I -- you know, I think you'll find it fairly routine and
standard.
-------------------------------------------------------------------------------
DAVE CAITLYN - ERIC DATA - ANALYST
Well, I am directing the question specifically to Roy, if you don't mind.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Okay.
-------------------------------------------------------------------------------
DAVE CAITLYN - ERIC DATA - ANALYST
Roy, I am trying to get at whether there is any break-up fees or any penalties
or anything whatsoever that would preclude or make it difficult or encumber
some, for someone else, some other company to come in and make a alternative
offer?
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
The detailed terms and conditions, [Dave], will be filed. I think you'll find
them to be standard and yet allow, you know, Mercator to carry out its
fiduciary responsibilities. Let me just add that, you know, based on the
current state of the business and the current state of our industry. We did go
through a very thorough market check and we believe that it's the right
strategic alternative for the company and its stockholders. And this thing
will be filed in a few days. So you'll be able to read the details at that
point in time.
-------------------------------------------------------------------------------
DAVE CAITLYN - ERIC DATA - ANALYST
Well with all the respect, the market place itself is the best determinant of
what the true value of this is and if you've left the door open. So that
competitive bids can come in that's one thing, but if you've made
restrictions, difficulties, or imposed any kind of hurdles that have made it
otherwise that is not. Now you are saying that we'll see the SEC filings and
matter of dates, so I assume it will be sometime this week. Correct?
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
That is correct. And Dave I appreciate your questions and sensitivity -- and
just don't have the liberty at this point to provide, you know, more details.
-------------------------------------------------------------------------------
DAVE CAITLYN - ERIC DATA - ANALYST
Okay, well the close the way I opened, I' am very unhappy.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Well I hope when you get a chance to see the documents and if you get a chance
to see the outcome of this, our goal is to change your mind.
-------------------------------------------------------------------------------
DAVE CAITLYN - ERIC DATA - ANALYST
Well you can't because I' am a Mercator stockholder, I am getting cash for
what I feel and I am a major stockholder as Roy and Ken know, so I' am
getting cash. So the outcome of the benefits for the employees, for the --
Ascential stockholders, for the customers has nothing to do with me, as a
Mercator stockholder. So, there is nothing that will be in the documents that
will make me feel any different.
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
I understand your perspectives and let's have the next question please.
-------------------------------------------------------------------------------
OPERATOR
Thank you. And at this time I would like to turn the meeting over for closing
comments and statements.
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
No more questions. Okay. Let me just have a brief closing comments and then
turn it over to Peter. I do believe that both companies have a very rich
history and a strong commitment to the integration needs of our customers in
the industries in which they operate. In getting to know Peter and his team in
recent weeks, the companies appear to have very similar values and cultures.
And I believe the combination creates a company with a critical mass to
profitably grow and scale our combined integration software platform while
providing greater coverage to our service through our customers and partners.
I can assure you that the Mercator remains committed to focus on Q3 business
and doing what is necessary to ensure a successful transition of Mercator's
assets to Ascential. Peter.
-------------------------------------------------------------------------------
PETER GYENES - ASCENTIAL SOFTWARE - CHAIRMAN AND CEO
Yes. Thanks a lot. Just a couple of closing comments if I may. It's always
been our goal here at Ascential to be the global enterprise data integration
leader and to do so by providing our customers with the broadest and the
highest performing enterprise data integration suite of products and of
solutions. A strategy of continually expanding our offerings in this direction
through combinations of internal development and strategic acquisitions that
hit tightly with our strategy, our culture, and our technology vision and that
do so in an accretive fashion. That strategy, we believe, has been working
well to accelerate our time to market and accelerate our ability to bring well
differentiated value to our customers and to our partners. We believe that
this combination of Mercator and Ascential continues this process in a very
appropriate fashion.
We do expect smooth integration of our companies because of the tight fit of
--- the complementary capabilities, comparable technologies, customers, and
partners, and very compatible cultures as where it points out. And also
together with what we think is the extended leadership in our marketplace,
that this combination provides we expect 2004 to be very nicely accretive for
us. We are confident that we've taken here a quantum step forward in our
ability to deliver a sustained and a superior value to all of the
constituencies here, customers, and partners, employees, and shareholders. I
do want to take this opportunity to thank the Mercator management team, the
Mercator Board, the entire Mercator family for your enthusiastic support of
this combination and for your hard work to make it all happen. And the same
thanks goes to the Ascential team. It's your hard work and efforts that has
made it possible to attract this wonderful talent and the quality asset of
this fine Mercator Company. And I also want to thank all of you on this call
and all of the -- and our shareholder community who have supported Ascential
and Mercator along the way. I can assure you that we will continue to work
hard, now as a larger company with more chance to being in industry force. We
will continue to work hard to continue earning your support. Thank you all
very much.
-------------------------------------------------------------------------------
ROY KING - MERCATOR SOFTWARE - CHAIRMAN AND CEO
Thank you.
-------------------------------------------------------------------------------
OPERATOR
This will conclude today's presentation. Thank you for participating and enjoy
the rest of your day.
CCBN reserves the right to make changes to documents, content, or other
information on this web site without obligation to notify any person of such
changes.
In the conference calls upon which Event Transcripts are based, companies may
make projections or other forward-looking statements regarding a variety of
items. Such forward-looking statements are based upon current expectations and
involve risks and uncertainties. Actual results may differ materially from
those stated in any forward-looking statement based on a number of important
factors and risks, which are more specifically identified in the companies'
most recent SEC filings. Although the companies may indicate and believe that
the assumptions underlying the forward-looking statements are reasonable, any
of the assumptions could prove inaccurate or incorrect and, therefore, there
can be no assurance that the results contemplated in the forward-looking
statements will be realized.
THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF
THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE
AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR
INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO
WAY DOES CCBN OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY
INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS
WEB SITE OR IN ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE
APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC
FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If a tender offer is commenced, any Offer to Purchase will be sent to all
Mercator stockholders. This document will contain important information and
should be read by stockholders. A tender offer statement on Schedule TO, which
will include the Offer to Purchase and other exhibits, will be filed with the
Securities and Exchange Commission. All documents filed with the SEC can be
examined for free at the SEC web site (http://www.sec.gov.). They are also
available without charge by calling the Investor Relations department at
508.366.3888 or by sending a written request to that department at Investor
Relations, Ascential Software Corporation, 50 Washington Street, Westborough,
Massachusetts 01581.