SBC Agrees to Buy Software Firm Sterling

SBC Communications Inc., the largest U.S. local telephone company, said Tuesday that it has agreed to buy Sterling Commerce Inc., a provider of electronic commerce software and services to businesses, for $3.9 billion in cash.

SBC is offering $44.25 for each Sterling share, a 40% premium to Sterling’s closing price Friday. Companies including Wal-Mart Stores Inc. and Johnson & Johnson use Sterling’s products to buy and sell goods and services online.

Local phone companies such as SBC are racing to offer customers a portfolio of services beyond traditional calling as they battle smaller rivals and long-distance providers entering local markets.

SBC Chief Executive Edward Whitacre is aiming to combine the sale of high-speed Internet connections with the software and services companies need to conduct transactions online.

Sterling shares rose $11.44, or 36%, to close at $43, and SBC fell $1.75 to close at $36.50, both on the New York Stock Exchange.

In addition to licensing e-commerce software, Dublin, Ohio-based Sterling collects fees for processing online transactions between companies.

Sterling employs 2,300. The company, which has been profitable in three out of the last four years, had $561 million in 1999 revenue, excluding a business it planned to sell.

No job cuts are expected as a result of the purchase, SBC said. SBC doesn’t plan to change the earnings estimates it previously provided to Wall Street analysts, a spokesman said. San Antonio-based SBC is expected to earn $2.27 a share in 2000, the average estimate of analysts polled by First Call/Thomson Financial.

“This deal helps SBC hit the ground running and instantly gain the needed expertise to compete in the hot [business-to-business] e-commerce sector,” independent telecommunications analyst Jeffrey Kagan of Atlanta said.