26 February 2003 Divine, the software conglomerate founded by Andrew ‘Flip’ Filipowski, has filed for Chapter 11 bankruptcy protection.
The filing was prompted by legal action instigated by creditors of RoweCom, a library software vendor that Divine acquired for $14 million in July 2001.
The lawsuit alleges that Divine fraudulently siphoned off $73.7 million from RoweCom. The company, which Divine had renamed Divine Library Services, was put into Chapter 11 bankruptcy protection while it negotiated the sale of the company to EBSCO Industries, leaving creditors out of pocket.
“It was the situation with the RoweCom subsidiary that made the board look at how it could go about protecting its assets,” Chris Blaik, European marketing director at Divine, told the Inquirer.
In a statement, the company admitted that it had just $25 million of cash in hand. The bankruptcy protection filing will enable the company to restructure its liabilities and resolve the lawsuit. It added that it was also considering an acquisition offer from investment group GTCR Golder Rauner.
However, Divine’s partly-owned computer services company Whitman-Hart – arguably the strongest of Divine’s many investments – is excluded from the Chapter 11 filing.
Founded in 1999, Divine went on an acquisition spree that included an eclectic range of companies, many of them regarded as burnt-out dot-com era failures, such as Eprise, Open Market and Viant.
In the quarter to the end of September 2002, Divine revenues stood at $162.2 million, although the company never made a profit and its cash flow was equally negative. As a result, without new financing, Divine would likely have been forced to file for bankruptcy protection soon, regardless of the lawsuit.
At the close of business on the Nasdaq stock exchange yesterday, the company was valued at just $3 million.
Divine’s founder Filipowski was behind the rise of Platinum Technology. Under his leadership, Platinum acquired more than 70 companies in 12 years, reaching $1 billion in revenues before it was sold to Computer Associates in 1999 for $3.5 billion.