Kana and Silknet Announce $4.2B Merger

Online customer support company Kana Communications (Nasdaq: KANA) and Internet business software provider Silknet Software (Nasdaq: SILK) announced today that they will merge in a stock deal valued at $4.2 billion (US$).

Under the terms of the deal, the shareholders of the Manchester, New Hampshire-based Silknet will receive 0.83 percent shares of Kana for each share of Silknet common stock.

The companies said they expect to close the merger in the second quarter.

Kana, which offers online customer communications solutions for marketing, sales and service, will fold in Silknet’s e-business platform and applications, the companies said. Silknet’s customer-facing application allows e-business customers to view preferences, support requests, sale questions and order status.

The combined company will offer a wide range of customer support solutions, the companies said, giving Internet businesses the option of working solely with the new company to address the growing needs of the online customer support market. The new company will have a work force of 600 on both U.S. coasts as well as in Europe and Australia.

“This combination enables Kana to expand our leadership by providing a Web-architectured e-business platform and a comprehensive suite of customer-facing applications for marketing, sales and service communications,” said Kana CEO Michael McCloskey.

Broad Support for Support

Kana and Silknet expressed confidence that the merger will position them well to tackle a growing market. The companies cited a Forrester Research report from June 1999 showing that 80 percent of online merchants believed an integrated view of customer support to be critical to their business.

However, just two percent of respondents had implemented such a solution.

The companies say that their package of personalized marketing, sales, e-commerce, and customer support solutions — as well as traditional call center contact — provide a unique and integrated e-business package.

Busy Year

Kana signed over 300 customers last year, including AT&T, Microsoft, Volvo and Time Warner. It also opened offices in Germany, the UK and Australia, and made a number of acquisitions to bolster its offerings. However, the company only booked revenues of $14.1 million for the year and more alarmingly, lost $118.7 million.

Silknet attracted Priceline.com, E*Trade, Datek Online, Carparts.com and more to its stable of clients. Backed by CMGI’s @Ventures and a number of venture capital firms, the company went public in May and reported second quarter revenue of $7.9 million and a net loss of $3.8 million.