Steve Bloom/The Olympian
Dan Weiss (left), chief financial officer, Terry Kremian (center), president, and Roger Moore, president and chief executive officer, have guided Illuminet since the Lacey-based company went public in 1999.

Illuminet sold for $1.2 billion

VeriSign buys Lacey-based high-tech company

CHRIS CLOUGH, THE OLYMPIAN

LACEY -- In what CEO Roger Moore called a perfect fit, Illuminet Holding Co. announced Monday that it would be acquired by VeriSign for $1.2 billion in stock.

The deal unites two high-tech leaders that have found success with similar business models. They have racked up a combined $989 million in revenues for the past four fiscal quarters.

"We mirror each other, but in entirely different space," said Illuminet president Terry Kremian. "We're in tele-communications, and they're on the Internet side of things."

Illuminet will become part of VeriSign's Enterprise and Service Provider Division. VeriSign's CEO Stratton Sclavos said Illuminet's base of operations will remain in South Sound.

"I don't anticipate anyone moving out of Lacey," Kremian said of the nearly 250 workers here. "We are already a successful business, and when you are successful, you don't want to touch what they do."

That success has led to 22 straight profitable quarters for Illuminet, which went public in 1999 and has roots in South Sound that go back the 1980s and its predecessor company, U.S. Intelco.

Illuminet is a specialized company that helps telecommunication carriers, both wireless and traditional, route calls with its computerized signaling system. It also connects carriers to the databanks necessary for toll-free calls, caller ID and other such services.

VeriSign's digital trust services portfolio includes Web identity, authentication and payment services.

Kremian said VeriSign owns the dot.com registry and anyone with a Web site domain ultimately goes through VeriSign. It will soon add the dot.info and dot.biz registries.

The Mountain View, Calif.-based company expects about $1 billion in revenue for this fiscal year.

The deal, which must clear federal securities hurdles, would allow VeriSign to tap Illuminet's telecommunication expertise, while Illuminet garners both Internet savvy and access to deeper pockets.

Sure to be synergy

Kremian thinks the whole will be better than the sum of the parts.

"More access to the Internet side gives us the ability to add more services related to the PSN (Public Switched Telephone Network)," Kremian said. "We'll be able to pick each other's brains on projects, and there's sure to be synergy out of that."

Wall Street and analysts also showed support. Both Illuminet and VeriSign's stock rose Monday under heavy trading. Illuminet was up $1.39 to $36.37 with more than 7,000,000 shares traded.

"It makes a great deal of strategic sense for Illuminet to get involved in this transaction," said Steve Levenson, a New York-based research analyst with Gerard Klauer Mattison.

Illuminet shareholders, which must approve the acquisition with at least a 66 percent yes vote, would get 0.93 VeriSign shares for each Illuminet share. For example, an Illuminet investor with 100 shares would then have 93 VeriSign shares.

"It's a super deal for VeriSign," Levenson said. "Illuminet is a company that's already meeting margin targets VeriSign has set for themselves."

In the second fiscal quarter of 2001, Illuminet posted a net income of $10 million on revenues of $47.2 million, more than a 20 percent margin.

If all goes smoothly, the transaction could be complete at the end of the fourth quarter or in early 2002.

Moore returned Monday from California for an afternoon meeting with all of Illuminet's Lacey staff, sharing with them how the partnership will help the company navigate the next generation of telecommunications that will combine Internet and wireless technology.

The deal is somewhat of a role reversal for Illuminet, which has used some of the proceeds from its $78 million initial public offering to buy other companies, including BellSouth International's roaming and clearinghouse subsidiary, BellSouth International Wireless Services, for $25 million in August.

Illuminet also acquired National Telemanagement Corporation in Texas for about $84 million in stock in June 2000.

As for being acquired, Kremian said it was bittersweet.

"On the one hand, this entity that you have put the blood, sweat and tears into all these years no longer exists," said Kremian, who has been with Illuminet since 1997.

"But at the same time you know it's the right thing to do for future growth and to keep our success going."

On the market

Illuminet

- Traded: Nasdaq, under the symbol ILUM

- Monday's close: $36.37, up $1.39 or 3.97 percent

- Volume: 7,398,400 shares. Average volume of 308,045

- 52-week high, low: $36.49 and $13.06

VeriSign

- Traded: Nasdaq, under the symbol VRSN

- Monday's close: $39.86, up $1.56 or 4.07 percent

- Volume: 23,356,000 shares. Average volume of 7,441,454

- 52-week high, low: $214.38 and $26.25

On the web:

Verisign Inc..

Illuminet.

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