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I constantly look for backdoor plays in upcoming IPO's, spin-offs, and special situations. It looks like there may be a new one to place on a "Watch-List" after Internet Capital Group (ICGE) took a 36% stake (28% on a fully diluted basis) in VCommerce Corporation this morning. ICG purchased $13 million of Series B Participating Preferred Stock of Vcommerce, and will hold two of six Board seats in this Scottsdale, Arizona based entity.

Please be advised that a "Watch List" is meant solely for monitoring purposes until it becomes an "active list."

Here is how Vcommerce describes itself: Vcommerce provides on-demand commerce and fulfillment solutions for multi-channel retailers and direct-to-consumer companies of all types. The Company offers turn-key solutions and customized features that allow customers to rely on Vcommerce for some or all of their e-commerce functions, from hosting an entire e-commerce site to supporting back-end functions such as managing drop-ship suppliers. As a complete solution, Vcommerce enables retailers, distributors and manufacturers to merchandise products, accept orders from customers, authorize and settle credit card transactions, ship products directly to the consumer, handle returns and manage customer service through the Vcommerce platform with minimal operating overhead and no IT infrastructure.

My Take on the company: This sounds like a super supply chain management software suite that also integrates on the front-end of the store for consumers as well, all in one broad-based solution. After having done some work for a supply chain management software company last year, this seems to take the software suite a step further by acting as the front-end for returns and for its e-commerce suite but also eliminates part of the back-end in that this sort of picks up from the point that a retailer (for example) actually receives its widgets at their supply point. It may go much further than that, but that is just how it sounds on the surface.

Vcommerce reportedly expects its 2006 revenue to be approximately $20 Million, inclusive of hosting fees, implementation fees, transaction fees and, in some cases, gross merchandise sales revenue. Vcommerce's clients according to the company are Target, Overstock.com, eToys Direct, David's Bridal, MTV Networks, Baby Universe and Ritz Interactive, among others.

The interesting thing about this company is that they have been around for some time and has raised capital in the past, and it has been on the IPO radar before as "one to watch" in the group. Vcommerce previously had raised over $65 million in total VC funding, including a late 2000 infusion that valued the company up supposedly around $221 million. Participants in that deal included Benchmark Capital, Archery Capital, American Express (AXP), Pequot Capital, Dain Rauscher, PaineWebber (part of UBS, (UBS)), Inktomi Corp. (now a Yahoo! subsidiary), and CMGI @Ventures (part of CMGI).

I have to go way back to review percentages of ownership, but this 33% stake from ICGE today is likely the largest if you recall that the valuations being made in 2000 were up in the stratosphere. If you back-out today's numbers this would imply roughly a $36.1M approximate current valuation, or something to the tune of $46.4M if it was on a fully diluted basis. You should double-check those numbers on your own since I usually just eyeball these for a glimpse of what to expect instead of getting down into the minutia on something that will take a long time to pan out. ICGE's market cap is currently pegged at $357.2M, so it will be interesting to see if they are able to get this to come out in an IPO in the next 12 months. CMGI is also already more than twice the size of ICGE with its $725M market cap and I didn't see it as an "Active" listed portfolio company on CMGI's @Ventures roster found at http://www.cmgi.com/ventures/fundedco.shtml for your review. Typically we need to see valuations climb back to $200M or more before any large underwriters will bother to bring a software company public, although there are many smaller underwriters that would consider much smaller deals. This will likely take a long time to pan out, so stay tuned and keep this as a potential back-door play into a future IPO.

Source: Internet Capital Group Buys 33% Stake in Vcommerce (ICGE)