Filed by PC Connection, Inc.
Pursuant to Rule 425 under
the Securities Act of 1933
Commission File No. 0-23827
Subject Companies:
PC Connection, Inc. and
Cyberian Outpost, Inc.
NEWS FROM PC CONNECTION, INC.
-----------------------------
730 Milford Road, Merrimack, NH 03054 * 603-423-2163 * www.pcconnection.com
For more Mark Gavin, CFO PC Connection, Inc.
information (603) 423-2451 Cyberian Outpost
contact: mgavin@pcconnection.com Commission File Number: 000-24659
Christopher J. Walls,
VP, Corporate Counsel
(860) 927-2318
cwalls@outpost.com
PC CONNECTION, INC. TO ACQUIRE CYBERIAN OUTPOST, INC.
Stock-for-Stock Transaction Will Add Strong Internet Brand
MERRIMACK, NH AND KENT, CT- MAY 30, 2001- PC Connection, Inc. (NASDAQ: PCCC), a
leading direct marketer of information technology products and solutions, and
Cyberian Outpost, Inc. (Outpost.com) (NASDAQ: COOL), a leading Internet provider
of consumer technology and e-business services, today announced they have signed
a definitive merger agreement.
The transaction is structured as a stock-for-stock, tax-free merger and will be
accounted for under the purchase method of accounting. The Boards of both
companies have unanimously approved the transaction and expect it to close in
the third quarter of 2001. The merger is subject to approval of the Cyberian
Outpost stockholders and to other closing conditions.
Under the terms of the agreement, each share of Cyberian Outpost common stock
will be converted into shares of PC Connection common stock based upon an
exchange ratio. The ratio will vary with the level of total revenues generated
by Cyberian Outpost for the months of June, July and August 2001, as well as
with changes in the average closing price of PC Connection common stock over a
ten-day period ending four days prior to the closing. If the stock price of PC
Connection is between $12.15 and $14.85 per share, the exchange ratio will be
between .0350 and .0550, depending on the total revenue generated by Cyberian
Outpost. The exchange ratio will float if the average price of PC Connection
common stock exceeds $14.85, or is less than $12.15 and equal to or greater than
$10.80. If the PC Connection stock price is less than $10.80 per share, the
exchange ratio will be between .0398 and .0620. However, if the PC Connection
stock price is below $10.125 per share, Cyberian Outpost has the option of
terminating the agreement unless PC Connection elects to increase the exchange
ratio to maintain the value of the stock to be received.
PC Connection also received an option to acquire from Cyberian Outpost up to
19.9% of its common stock at a price of $0.51 per share, which option shall
become exercisable upon the occurrence of certain conditions. PC Connection has
also agreed to immediately provide Cyberian Outpost with a working capital line
of credit of up to $3 million and an inventory line of credit of up to $5
million, each of which will be secured by Cyberian Outpost's assets.
In announcing the transaction, Patricia Gallup, Chairman and Chief Executive
Officer of PC Connection, Inc., stated, "We welcome Cyberian Outpost to the
growing family of PC Connection companies. This acquisition is consistent with
our stated growth strategy and complements our existing business. Based on
anticipated cost savings and gross margin enhancements, we believe the
transaction will be accretive to PC Connection's earnings per share in the first
year."
Merrimack, NH-based PC Connection was founded in 1982 with an original
investment of $8,000. The company soon became one of the country's top direct
marketing resellers. PC Connection's sales for the year 2000 were $1.45 billion.
The company is focused on serving the information technology needs of the SMB
market (small- and medium-sized businesses). Kent, CT-based Cyberian Outpost
(Outpost.com) was founded in 1995. The company, a
pioneer in online sales, has approximately 1.3 million customers worldwide.
Cyberian Outpost reported net revenue of $355 million for the fiscal year ended
February 28, 2001. The company will continue to operate under its own brand from
its current facilities. Darryl Peck, President and Chief Executive Officer of
Cyberian Outpost will remain with the company after the acquisition, reporting
to Robert Wilkins, Executive Vice President of PC Connection, Inc.
"We believe that having a multi-brand, multi-channel strategy is key to our
ongoing growth," said Robert Wilkins. "The acquisition of Cyberian Outpost
further strengthens the foundation PC Connection has successfully built over the
past two decades." Wilkins added, "Darryl Peck brings to PC Connection a wealth
of technology marketing experience developed over the last thirteen years. He
will be a great addition to our management team."
Darryl Peck commented, "We are excited about the opportunity to combine our
resources with PC Connection for the benefit of our customers, shareholders and
employees. PC Connection is a company I have long admired and respected. This
merger will enable us to more successfully compete in the consumer technology
market." RBC Dain Rauscher Wessels advised Outpost.com in connection with this
transaction.
PC Connection and Cyberian Outpost management will discuss the contents of this
press release during a conference call today at 2:00 p.m. Eastern standard time.
To participate, call 877-692-2137 code PCCC.
ABOUT PC CONNECTION, INC.
PC Connection, Inc., a Fortune 1000 company, is a rapid-response provider of
information technology products and solutions. The Company offers more than
100,000 brand-name products through its staff of technically-trained outbound
sales account managers and catalog telesales representatives, its comprehensive
web sites at www.pcconnection.com, www.macconnection.com and www.comteq.com, and
its catalogs PC Connection (1-800-800-5555) and MacConnection (1-800-800-2222).
Through its full-service Distribution and Custom-Configuration Center, PC
Connection can deliver custom-configured computer systems overnight. For the
year 2000, PC Connection was ranked number 7 in Business Week's annual listing
of the world's leading information technology companies. Also, Yahoo! Internet
Life recently named PC Connection "the best place to shop for computers," and
listed the Company's web sites among the 100 Best Sites on the Internet. In
addition, PC Connection has won PC World magazine's prestigious "World Class
Award" nine times over the past 11 years, including 2000.
ABOUT CYBERIAN OUTPOST, INC.
Cyberian Outpost, Inc. (Outpost.com) established in 1995, is a leading Internet
retailer of consumer technology products and has recently expanded its business
model to offer its outstanding customer shopping experience to a number of
highly visible partners. Partnerships with Tweeter Home Entertainment Group and
Brookstone collectively expand the clicks and mortar presence of Outpost.com to
approximately 300 land-based retail stores. Additionally, Outpost.com e-
Business Services provides solutions encompassing site design, site maintenance,
order management and fulfillment. These partnerships build on the strength of
the Outpost.com #1 top-rated consumer shopping experience on the Web as rated by
the on-line rating service Bizrate.com and the 2000 and 1999 #1 PowerRanking for
Computing by Forrester Research. Today, Outpost.com has an existing base of
approximately 1.3 million customers and approximately 4 million visitors per
month to its Website.
OTHER IMPORTANT INFORMATION
PC Connection plans to file a Registration Statement on SEC Form S-4 in
connection with the merger and Cyberian Outpost expects to mail a Proxy
Statement/Prospectus to its stockholders containing information about the
merger. Investors and security holders are urged to read the Registration
Statement and the Proxy Statement/Prospectus carefully when they are available.
The Registration Statement and the Proxy Statement/Prospectus will contain
important information about PC Connection, Cyberian Outpost, and the merger and
related matters. Investors and security holders will be able to obtain free
copies of these documents through the web site maintained by the U.S. Securities
and Exchange Commission at http//www.sec.gov.
In addition to the Registration Statement and the Proxy Statement/Prospectus, PC
Connection and Cyberian Outpost file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy any reports, statements and other information
filed by PC Connection and Cyberian Outpost at the SEC public reference rooms at
450 Fifth Street, N.W., Washington, D.C. 20549 or at the Commission's other
public reference rooms in New York, New York and Chicago, Illinois. Please call
the
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Commission at 1-800-SEC-0330 for further information on public reference rooms.
PC Connection's and Cyberian Outpost's filings with the Commission also are
available to the public from commercial document-retrieval services and at the
web site maintained by the Commission at http//www.sec.gov.
Cyberian Outpost, its directors, executive officers and certain members of
management and employees may be considered participants in the solicitation of
proxies in connection with the merger. Information concerning Cyberian
Outpost's directors and executive officers can be found in the Form 10-K for the
year ended February 28, 2001 as filed with the SEC. Certain directors and
executive officers of Cyberian Outpost may have direct or indirect interests in
the merger due to securities holdings, vesting of options, and rights to
severance payments if their employment is terminated following the merger. In
addition, directors and officers, after the merger, will be indemnified by PC
Connection, and benefit from insurance coverage, for liabilities that may arise
from their service as directors and officers of Cyberian Outpost prior to the
merger. Additional information regarding the participants in the solicitation
will be contained in the Proxy Statement/Prospectus.
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"Safe Harbor" Statement for PC Connection, Inc. under the Private Securities
Litigation Reform Act of 1995: This release may contain forward-looking
statements that are subject to risks and uncertainties, including, but not
limited to, the impact of changes in the overall level of economic activity, or
in the level of business investment in information technology products,
competitive products and pricing, product availability and demand and market
acceptance, new products, fluctuations in operating results and other risks
detailed under the caption "Factors That May Affect Future Results and Financial
Condition" in PC Connection's 2000 Annual Report on Form 10-K filed with the
Securities and Exchange Commission for the year ended December 31, 2000. More
specifically, the statements in this release concerning PC Connection's ability
to integrate and assimilate the acquired business, the level of cost savings or
margin improvements that may be realized, gross margin percentage and selling
and administrative costs and other statements of a non-historical basis
(including statements regarding implementing strategies for future growth, the
ability of PC Connection to sustain its model of profitable growth and the
expected benefits of PC Connection's electronic commerce strategy) are forward-
looking statements that involve certain risks and uncertainties. Such risks and
uncertainties include the continued acceptance of PC Connection's distribution
channel by vendors and customers, continuation of key vendor relationships and
support programs and the ability of PC Connection to hire and retain qualified
sales account managers and other essential personnel.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
"Safe Harbor" Statement for Cyberian Outpost, Inc. under the Private Securities
Litigation Reform Act of 1995: This press release may contain forward-looking
statements, including statements about our intention to consummate the proposed
merger. The statements in this release are not guarantees of future performance
and actual results could differ materially from current expectations as a result
of numerous factors. Potential risks and uncertainties include, but are not
limited to: the inability to consummate the merger due to the stockholders not
approving the merger or the inability of Cyberian Outpost to fulfill the closing
conditions set forth in the agreement, computer sales may continue to slow,
and/or its average order size may decrease; the ability to attract and retain
key personnel and customers; actual results in connection with continuing or
discontinued operations and other risks detailed in Cyberian Outpost's reports
filed with the Securities and Exchange Commission. In the event the merger is
not consummated, potential risks and uncertainties include, but are not limited
to the availability of continued financing; Cyberian Outpost's ability to
address its financing obligations in light of its existing debt obligations and
market conditions; the results of efforts to implement the company's business
strategy, including filing for restructuring; Cyberian Outpost may be unable to
enter into strategic alternatives on favorable terms or at all, the uncertainty
of Cyberian Outpost's ability to continue as a going concern, the possibility of
delisting of Cyberian Outpost's common stock from the Nasdaq National Market and
the effect that Cyberian Outpost's financial condition may have on the
willingness of customers to purchase product from Outpost.com or on its
relationships with vendors and suppliers and their willingness and ability to
supply Cyberian Outpost with inventory.
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ATTACHMENT A
- -------------------------------------------------------------------------------------
FINANCIAL OPERATING STATISTICS
- -------------------------------------------------------------------------------------
CYBERIAN
(AT OR FOR THE THREE MONTHS ENDED PC CONNECTION, INC. OUTPOST, INC. COMBINED
MARCH 31, 2001) ONLY ONLY
- -------------------------------------------------------------------------------------
Product Mix:
Notebooks 24% 13% 21%
Desktop/Servers 13 20 15
Storage Devices 10 14 11
Software 12 12 12
Networking Communications 9 14 10
Printers 8 8 8
Video & Monitors 8 10 9
Memory 3 6 4
Accessories/Other 13 3 10
-------- -------- ----------
TOTAL 100% 100% 100%
======== ======== ==========
PLATFORM MIX:
Wintel 91% 75% 87%
Apple Related 9 25 13
-------- -------- ----------
TOTAL 100% 100% 100%
======== ======== ==========
CHANNEL MIX:
Outbound 77% 2% 56%
Inbound 13 21 15
Internet 10 77 29
-------- -------- ----------
TOTAL 100% 100% 100%
======== ======== ==========
AVERAGE ORDER SIZE:
Outbound $ 1,650 $ 1,307 $ 1,646
Inbound 473 385 439
Internet 386 187 215
Total Company 1,040 273 560
Active Customers 589,000 750,000 1,339,000(1)
# OF ORDERS ENTERED BY CHANNEL:
Outbound 176,000 2,000 178,000
Inbound 99,000 64,000 163,000
Internet 78,000 483,000 561,000
-------- -------- ----------
Total Orders Entered 353,000 549,000 902,000
======== ======== ==========
(1) Not adjusted for customer overlap.
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ATTACHMENT B
The "Exchange Ratio"
Excerpted from the Merger Agreement (Sections 3.02 to 3.04), dated May 29, 2001
3.02. CERTAIN DEFINED TERMS. As used herein, the following capitalized
terms shall have the specified values or meanings.
(a) "PC CONNECTION INDEX PRICE" shall mean $13.50 per share of PC
Connection Common Stock.
(b) "PC CONNECTION TRADING PRICE" shall mean the average closing price of
PC Connection Common Stock on the Nasdaq National Market System (as reported by
The Wall Street Journal or, if not reported thereby, another authoritative
source) for the ten consecutive trading days ending on the fourth day preceding
the Closing Date.
3.03 EXCHANGE RATIO. The "EXCHANGE RATIO" shall be determined as follows:
(a) If the PC Connection Trading Price is equal to or greater than
$12.15 and is no greater than $14.85 (the "Base Range"), the Exchange Ratio
shall be determined as follows ("Total Revenue" means Cyberian Outpost's total
revenue for the months of June, July and August, 2001):
EXCHANGE RATIO TOTAL REVENUE
- ------------------------------------------------------------------------------------
0.0550 At least $71.6 million
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0.0500 At least $67.4 million but less
than $71.6 million
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0.0450 At least $63.2 million but less
than $67.4 million
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0.0400 At least $58.9 million but less
than $63.2 million
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0.0350 Less than $58.9 million
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If the PC Connection Trading Price is not within the Base Range, the otherwise
applicable Exchange Ratio set forth in this Section shall be used as the "BASE
EXCHANGE RATIO" for purposes of calculating the Exchange Ratio pursuant to
subsection (b) or (c) of this Section 3.03, as applicable.
(b) If the PC Connection Trading Price is greater than $14.85, the
Exchange Ratio shall be equal to:
14.85 X Base Exchange Ratio
--------------------------------
PC Connection Trading Price
where "Base Exchange Ratio" is determined in accordance with Section 3.03(a).
(c) If the PC Connection Trading Price is less than $12.15 and is
equal to or greater than $10.80, the Exchange Ratio shall be equal to:
12.15 X Base Exchange Ratio
--------------------------------
PC Connection Trading Price
where "Base Exchange Ratio" is determined in accordance with Section 3.03(a).
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(d) If the PC Connection Trading Price is less than $10.80, the
Exchange Ratio shall be as follows, unless the PC Connection Trading Price is
less than $10.125 and the Exchange Ratio is increased or this Agreement is
terminated in accordance with Section 3.04 hereof:
EXCHANGE RATIO TOTAL REVENUE
- ------------------------------------------------------------------------------------
0.0620 At least $71.6 million
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0.0560 At least $67.4 million but less
than $71.6 million
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0.0509 At least $63.2 million but less
than $67.4 million
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0.0454 At least $58.9 million but less
than $63.2 million
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0.0398 Less than $58.9 million
- ------------------------------------------------------------------------------------
If the PC Connection Trading Price is less than $10.80, the otherwise applicable
Exchange Ratio set forth in this Section 3.03(d) shall be used as the
"APPLICABLE EXCHANGE RATIO" for purposes of calculating the Exchange Ratio
pursuant to Section 3.04.
3.04 TERMINATION, NOTICE AND CURE.
(a) If the PC Connection Trading Price is less than $10.125, Cyberian
Outpost may elect by giving written notice to PC Connection prior to the third
business day immediately preceding the closing date to terminate this Agreement.
Within two business days thereafter, PC Connection may elect to increase the
exchange ratio to:
10.125 X Applicable Exchange Ratio
--------------------------------------
PC Connection Trading Price
where "Applicable Exchange Ratio" is determined in accordance with Section
3.03(d).
(b) In the event PC Connection makes an election referred to in the
preceding Section 3.04(a), this Agreement shall not terminate and the Exchange
Ratio shall be determined in accordance with such Section 3.04(a). In the event
PC Connection does not elect to increase the Exchange Ratio, this Agreement
shall terminate on the date established as the closing date.
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