NaviSite to buy hosting company Surebridge

A popular enterprise applications hosting company, Surebridge, said Thursday it will sell itself to fellow ASP (application service provider) NaviSite in a deal worth around $54 million.

Andover, Massachusetts-based NaviSite will issue two promissory notes totaling $39.5 million, plus 3 million shares of its stock, valued at $14.7 million based on Wednesday’s close, in payment for Surebridge, headquartered in Lexington, Massachusetts. The acquisition continues a consolidation trend in the managed applications and infrastructure market: Both NaviSite and Surebridge bulked up by buying smaller rivals.

Surebridge was Microsoft’s first hosting-services partner for its Microsoft CRM (customer relationship management) system. At the start of the year, executives said the company had several dozen companies live on its hosted version of Microsoft’s CRM software. The company also partnered with PeopleSoft Inc. to offer hosted applications.

Surebridge Chief Executive Officer Peter Boni said he will leave the company following the acquisition. Surebridge currently has a staff of 230; Boni declined to estimate how many will make the transition to NaviSite, saying only, “NaviSite has acquired the entire company.”

NaviSite is a survivor of the dot-com meltdown. Started by incubator CMGI in 1997, the company came close to running out of money before being saved by loans and restructuring. In the past year, it has replaced most of its management team — sometimes twice, in the case of its chief financial officer. It finished its most recent quarter, ended Jan. 31, with cash on hand of $7.7 million and a net loss of $3.4 million, on revenue of $22.3 million.

Boni said NaviSite’s shallow financial resources don’t worry him: Combined with Surebridge, NaviSite will have a positive cash flow and more than $30 million in revenue each quarter, he said.

Executives said the Surebridge acquisition is expected to close later this month. Boni said he does no expect any disruption for customers.