ICG to Buy Netcom; 1-Stop Shop Is Goal

ICG Communications Inc. on Monday said it will buy Internet service provider Netcom On-Line Communications Services Inc. for $283.5 million in stock, in the latest combination of phone and Internet companies.

Based on the closing price of ICG shares Friday, the value of the transaction is about $22.65 a share, said the companies, which made the announcement before markets closed Monday. That gives San Jose-based Netcom shareholders a 50% premium to Friday’s closing price of $15.13.

The acquisition will combine Englewood, Colo.-based ICG, which provides local, long-distance and data services in California, Colorado, the Ohio Valley and the Southeastern U.S., with Netcom, one of the earliest commercial services to connect customers to the Internet. The companies hope to provide one-stop shopping--all their services to customers on one bill.

The move follows similar combinations by companies such as GTE Corp., which bought BBN Corp., and WorldCom Inc., which announced plans last month to acquire the Internet units of CompuServe Corp. and America Online Inc., and made a bid for MCI Communications Corp., one of the top Internet service providers.

Under the transaction, Netcom shareholders will receive 0.8628 ICG share for each Netcom share they own.

In Nasdaq trading Monday, ICG shares fell $1.06 to close at $25.19, and Netcom soared $6.06 to close at $21.19.

Netcom, an unprofitable company with 550,000 customers, was originally started as a service to cater to consumers. It switched its strategy to focus on small-business customers, after deep-pocketed rivals, including Microsoft Corp.’s MSN online service and AT&T; Corp., moved into the consumer market.

Since going public at $13 a share in December 1994, Netcom shares have risen to as high as $82.75 amid optimism about the service-provider market.