PC Connection's Purchase of Outpost.com in Jeopardy

The acquisition of online electronics retailer Outpost.com is in jeopardy, according to a statement issued Wednesday by Outpost's potential buyer, PC Connection.

According to PC Connection, if Outpost is unable to meet the net-worth condition set in the merger agreement, PC Connection will void the deal . And Outpost recently told PC Connection that it may not be able to meet the net-worth condition, PC Connection said.

PC Connection spokesperson Mark Gavin told the E-Commerce Times that Outpost must show a net worth of US$14 million as of August 31st to meet the agreed-upon condition for closing the deal.

"That was one of the closing conditions that we had, [if Outpost can't meet it], it would mean their business was lower than we were expecting," Gavin said. "We're not going to waive that condition and if they don't meet it, the merger will not be consummated."

Looking Around

Outpost said in a statement that, in light of the position that PC Connection is taking on the net worth issue, it has started initial discussions with several other potential buyers.

However, Gavin said that if Outpost meets requirements for closing, PC Connection will move forward with the merger.

Last-Chance Dance

Despite six years in business, Outpost has yet to reach profitability and essentially ran out of money in recent months, forcing it to seek a buyer. Closing the PC Connection deal is likely one of the last chances for Outpost to stay in the dot-com dance.

On July 23rd, Outpost received a delisting notification from the Nasdaq stock exchange, which cited the company's failure to comply with Nasdaq's $1 minimum stock price requirement. Shares of Outpost closed Wednesday at 22 cents, unchanged from Tuesday's closing price.

"Because many of the closing conditions [of the PC Connection merger] are beyond the control of [Outpost], there can be no assurance that the merger will be completed by the end of October 2001, or at all," Outpost said last month.

The company also said that if it is not able to close the merger or to obtain additional financing or complete another sale or merger transaction, it is unlikely that it would be able to continue as a going concern.

Cash on the Barrel

Terms of the deal also call for PC Connection to provide Outpost with a $3 million working capital line of credit and an inventory line of credit up to $5 million.

In July, Outpost reported a first-quarter net loss, excluding charges for impairment of goodwill and restructuring charges, of $10.2 million for the quarter and a basic and diluted net loss per share of 32 cents.

PC Connection had planned to run Outpost as a separate business and maintain its Kent, Connecticut-based operations.