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MAID Completes Acquisition of Knight-Ridder Information
by
Posted On November 24, 1997
On November 10, the MAID board of directors announced that at the Extraordinary General Meeting held that day, resolutions required to approve the acquisition of Knight- Ridder Information, Inc. (KRI) were approved by MAID's shareholders, reportedly by a unanimous show of hands. The purchase price was $420 million, financed partially by the recent issuance of new shares.

MAID Ordinary Shares and American Depositary Shares (ADS) opened for trading November 14 on both the London Stock Exchange and the NASDAQ, respectively, following their trading suspension October 2, pending completion of the acquisition. MAID plc officially changed its name to The Dialog Corporation plc on November 17, and trading in its Ordinary Shares and ADS under the new name and symbol began on November 18. The company's ADS trade under the new symbol "DIALY" and the Ordinary Shares under the new symbol "DLG" on the London Stock Exchange. During the first week of trading, the stock dropped about 10 percent, attributed mostly to market adjustment due to the suspension, and partly to the wait for an integration announcement. By the end of the week it had recovered slightly, and company representatives expected stability.

Dan Wagner, chief executive of The Dialog Corporation (former chief executive of MAID), said: "The real work now begins in implementing our integration plans and delivering the benefits that the combination of MAID and Knight-Ridder Information offers both to our customers and our shareholders. The formation of The Dialog Corporation represents an exciting step forward for both companies, and I look forward to updating you on our progress over the coming months."

The president of KRI, Jeff Galt, has joined the board and been named executive vice president of the new company. (By the way, those of us who visited the MAID site and viewed the board composition were dismayed to notice the lack of any female board members.) Galt is based in the U.S.; his counterpart in London is Derek Smith.

Galt provided the following statement concerning the new company and its future.

"The recent spate of mergers is indicative of the need for and value of scale in this increasingly resource-intensive industry. The need for resources devoted to technology and technical innovation, content acquisition and development, and customer service and support are expanding rapidly in this truly global industry in which the pace of change is accelerating rapidly. The combination of MAID and DIALOG creates a true industry leader in many dimensions--content, technology, and customer support, and it does so on a worldwide basis. We are enthused about what that leadership position will enable us to deliver to customers in terms of enhanced products and services with a firm commitment to quality and customer satisfaction. The next few years are going to be exciting for all of us."

Some Questions Answered

While many details of the integration and plans for the new company could not be released at this point, sources confirmed plans for three main operating divisions. The groupware and intranet solutions division is seen as having great potential, with plans to use information professionals in organizations to roll out information services within the organization. The interactive solutions division would consist of the DIALOG and DataStar services, plus the two end-user products, Profound and DIALOG Select. The third division is to be alliance revenues, which would encompass and expand upon current alliances with companies like AltaVista and Microsoft.

There was speculation that the Cary, North Carolina, headquarters of MAID's U.S. operation would close and move to KRI's headquarters in Mountain View, California-- with the opposite rumored as well. However, in a phone interview on November 12, Wagner said that neither site would close, but both would be downscaled from current employee levels. The Cary location is likely to be the headquarters for U.S. sales, while the California base would house some headquarters functions, key management, and the technical division.

In answer to the nagging question of whether the KRI professional online services would be changed, merged, or absorbed in some way, Wagner emphatically stated that the DIALOG and DataStar services would remain. The company will not change the way they are used by professional searchers, but it would take steps to bridge the gap between the two for data retrieval. One step will be a consolidation of the three separate data centers into a single center in Palo Alto, California. Wagner also announced plans to bridge the "cultural gap" between DIALOG and DataStar, labeling it an "awful situation." He stressed that they intend to have "One company, one focus, one online business."

On another important question, Wagner said that MAID's InfoSort technology would ultimately be applied to all company databases, but only in products for the end-user market.

A Painful Process of Integration

While the deal certainly moved quickly, employees of Knight-Ridder Information and MAID had been waiting anxiously to hear plans for them and their products, especially with the planned savings from the merger hoped to be at least $35 million, annualized.

On November 21, the company announced that the first stage of the integration of the two businesses had been implemented. With the wide duplication of customers and operational functions between the two companies, the combined workforce was reduced by 24 percent to 1,060. There were 330 employees let go, and another reduction of 120 due to attrition, with a total reduction of 450 from a total of over 1,500. The reductions were made from both MAID and KRI personnel on a global basis, across all functional areas including technology, administration, sales, and marketing. In addition, the company announced that 16 office leases in duplicated locations around the world would be terminated.

Dan Wagner said: "From the outset of our discussions, it was clear that there would be a reduction in the combined workforce as KRI's personnel growth had outpaced that of both revenue and profits in the past few years. It was also apparent that the elimination of duplicate functions would have to be addressed.

"Over the last 5 months, we have very carefully planned the integration and staffing cuts and decided to implement them as soon as possible in order to quickly address any potential uncertainty. While it is a painful task, it was the view of the combined management that these actions were vital to the growth and long-term health of The Dialog Corporation."

Indeed it was painful for management and employees, both for those leaving and those staying. One person who was let go called it "Black Friday" in an e-mail sent out to friends. In Mountain View, Jeff Galt met with the departing employees in a morning meeting, while those staying met off-site with Derek Smith. Similar meetings occurred in London. Galt said, "We have retained the outplacement firm Drake Beam Morin to advise and support those affected."

I think I speak for many in the industry when I say thank you to all of The Dialog Corporation folks, and good luck to those undertaking a job search.

Outside Views

Information professionals have expressed concern all along about the acquisition and the effects on company services and pricing. Most now seem resigned to the deal, and have taken a wait-and-see attitude, hoping that promises are kept concerning no cost increases and the availability of alternative pricing to an up-front annual subscription fee. While searchers remain wary, Information World Review, the industry newspaper in the U.K., reported that business and company information providers appear to be supporting the deal, while even scientific information providers seem confident that the new company will continue to support their content.

Buyout/Merger Mania

We have just seen the recent merger news of Desktop Data and Individual, Inc., pioneers in personalized news delivery. In November we reported the Reed Elsevier/Wolters Kluwer mega-merger. These and others reflect a consolidation trend that we are seeing in the information industry, as players jockey to grab market share and compete in a growing but increasingly competitive arena, with content providers, aggregators, and distributors all working deals and alliances. This mirrors the same amalgamation and deal-making we are seeing in other Internet-related sectors--the software business, among the Internet service providers, and in the telecom industry. Survival of the fittest is a tough game and allies are important.

Visit the new corporate Web site at http://www.dialog.com.


Paula J. Hane is a freelance writer and editor covering the library and information industries. She was formerly Information Today, Inc.’s news bureau chief and editor of NewsBreaks.


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