RoweCom Sues Divine;
Ebsco Negotiates a Purchase
Failed subscription agency RoweCom filed for Chapter 11 status in the Eastern Division of the U.S. Bankruptcy Court for Massachusetts January 27 and concurrently sued its parent company Divine to recover more than $73.7 million in subscription revenue it had transferred during the past 12 months. The lawsuit alleges that Divine had decided in the spring of 2002 not to support its subsidiary but that it continued to collect payments from thousands of libraries anyway. It also claims Divine “looted” its own agency “in bad faith and with the intent of hindering, delaying or defrauding RoweCom and its creditors.”
The bankruptcy filing lists some of RoweCom’s creditors, the largest of which include the National Institutes of Health Library ($2.4 million), Virginia Polytechnic Institute and State University ($1.6 million), the 3M Company ($1.3 million), and Lawrence Livermore National Laboratories ($1.2 million).
Meanwhile, the Alabama–based Ebsco Industries announced January 25 it had signed a nonbinding letter of intent to purchase RoweCom’s worldwide business. Earlier, Ebsco had shown an interest in acquiring only the European operation, but that was before Swets Blackwell withdrew its bid for the North American business.
The proposed transaction was endorsed by the steering committee of an ad-hoc group of publishers and library customers of RoweCom. The offer was made pending successful negotiations on how subscriptions already paid for can be fulfilled.
Posted February 3, 2003.
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