KPMG to Buy Some Units of Andersen

KPMG Consulting Inc. plans to acquire as many as 23 business consulting units of Andersen Worldwide’s member firms for up to $284 million, KPMG said Wednesday.

KPMG said it had signed a letter of intent that covers the consulting business of Andersen member firms in the United States, Europe, Asia and Latin America. Those businesses had combined revenue of about $1.4 billion last fiscal year.

KPMG already has acquired Andersen’s consulting business in Hong Kong and China.

Also Wednesday, Ernst & Young acquired Arthur Andersen’s Pittsburgh audit and tax practices in a deal involving 87 Andersen employees, who will join Ernst & Young’s office in that city.

McLean, Va.-based KPMG said completion of the deal is subject to reaching agreements with each of the Andersen member firms. Each deal will require the approval of local partners and regulatory authorities.

Besides the cash, KPMG said it planned to issue up to 6.5 million shares of stock over three years to Andersen’s consulting partners who join KPMG Consulting in the deal.

Shares of KPMG Consulting rose $2.22, or 15%, to $17.27 Wednesday on Nasdaq.

Andersen Worldwide includes Arthur Andersen, the Chicago-based company that audited Enron Corp.’s financial records. Andersen is on trial in Houston for an obstruction charge stemming from the shredding of Enron-related documents last year.

KPMG said the purchase of the business consulting practice of Andersen in the United States depends on “the satisfactory resolution of potential liability issues.”

“Our proposed acquisitions are consistent with KPMG Consulting’s stated business goal of strengthening our ability to service our global clients,” KPMG Chairman and Chief Executive Rand Blazer said in a statement.

KPMG hopes to have definitive agreements with the offices of Andersen willing to join the firm within 30 to 45 days, with closings completed sometime this summer, according to company officials.

The final cost of the acquisition will depend on how many Andersen offices agree to join KPMG, Blazer said, adding that 90% of the partners of each office must agree to join the company for the acquisition of the office to go forward. Those partners that refuse to join KPMG must abide by the non-compete agreement they signed with Andersen.

Andersen’s operations continue to shrink as more companies have dropped the firm as their auditor.