Terremark: Credit Crunch Scuttled Potential Sale

Terremark Worldwide (TMRK) said late today that a potential sale of the company was derailed by the credit crisis. The Miami-based colocation and managed hosting specialist said it received an unsolicited takeover offer in April, and worked on a potential deal through mid-September, when the Terremark board cited problems in the credit markets in its decision to halt efforts to sell the company.

Terremark said the takeover offer was presented by a "reputable investment firm" and represented a premium to the company's stock price at the time. The offer kicked off a five-month in which a special committee of the board conducted an exhaustive market check to determine whether the proposed price was fair to shareholders. 

"No definitive transaction with any third party ensued as a result of the process in light of global economic conditions and credit market illiquidity," the company said. "Therefore, the Board of Directors determined that it was in the shareholders' best interest to continue executing the company's business plan."   

The process of evaluating the transaction had a "significant impact on our results of operations and EBITDA," the company said in announcing earnings for the second quarter of its fiscal year, which ended Sept. 30. Terremark had revenues of $59.6 million, a 31 percent increase from the same period last year. But the company also had general and administrative expenses of $11 million, up from $8.9 million last quarter.

"The (potential) transaction was incredibly disruptive," said Terremark Chairman and CEO Manuel Medina, who said the effort involved substantial expenses (including professional fees) but also proved a distraction. "Notwithstanding that, we were near the top end of our revenue range," Medina said.

At the time of the offer in April, Terremark stock traded in a range between $5.50 and $6.50. Shares moved as high as $7.50 a share on Sept. 19, shortly after the collapse of Lehman Brothers triggered severe turbulence in the credit markets. The company's share price declined steadily, trading as low as $3.70 a share last week before closing today at $4.69. The company's results were released after the market's close. 

Terremark was the best-performing stock in our Data Center Investor performance tracking for the third quarter of 2008.