Who knew that temporary office space was going to get this big? And who knew e-business was going to get this big?

Put them together, and you have one of the more intriguing recent workplace-centered deals: In a transaction valued at US$1 billion HQ Global Workplaces, which has agreed to merge with Vantas Inc. for a combination of cash and a retained minority equity interest by CarrAmerica (www.carramerica.com).

The merged company, which will retain the name HQ Global Workplaces, will become the world's largest virtual and physical workplace solutions provider, serving more than 43,000 customers in 463 owned, managed or franchised centers in 17 countries. Based on the estimated fourth-quarter 1999 revenues of Vantas and HQ Global Workplaces, the combined company is expected to generate proforma revenues in excess of $500 million in 2000.

The merger provides CarrAmerica -- which owns, develops and operates office properties in 14 U.S. markets and owned owns a 95 percent economic interest in HQ Global Workplaces -- with $380 million in cash and approximately 19 percent of the equity in the combined company.

E-Business Big Part of Merger

FrontLine Capital Group (www.FrontLineCapital.com), the prominent developer of business-to-business (B2B) Internet companies that engineered the merger, will (along with minority shareholders) own approximately 81 percent of the combined company.

Officials at the newly merged entity say that the transaction will likely be funded with bank debt of the combined company and equity from strategic partners. In addition, FrontLine will appoint nine of the 11 board seats on the new HQ Global Workplaces Board of Directors. Scott Rechler, CEO of FrontLine Capital Group, will serve as chairman of the merged firm.

"This transaction provides our B2B e-commerce partner companies with unparalleled access to a global distribution network from which they can rapidly expand their businesses while maintaining physical points of presence near their customers," said Rechler.

"By marketing to the large base of customers who have broadband access through the network of HQ centers, our partner companies will be able to effectively develop, test and rollout next-generation B2B e-commerce applications," Rechler continued. "In addition, the HQ locations provide FrontLine with the platform to build a dominant global network of incubators for B2B e-commerce companies."

Many analysts consider the merger a major shift the traditional executive office suite industry. HQ Global Workplaces, they say, now becomes a comprehensive "e-fulfillment enterprise" with both virtual and physical capabilities.

Combining the resources of HQ Global Workplaces, VANTAS and FrontLine, say many industry insiders, will also create a brand broadly recognized for both alternative work space and business-to-business e-commerce. That, in turn, will appeal to a broad business range, including entrepreneurs, Internet start-ups, fast-growing small, as well as to the mobile workforces of larger corporations, they say.

'A Revolution in How People Work'?

The new company, say officials, will be able to provide high-speed Internet-access and broadband connectivity, information technology consulting and support, videoconferencing, high-tech offices and meeting facilities, and team rooms.

Company officials say that "24/7" administrative and concierge services will also be added at some of the merged firm's locations.

The merger creates a new kind of single-source provider, said Gary Kusin, CEO of HQ Global Workplaces, who will continue as CEO of the new combined company, which will be headquartered in Dallas.

"Our partnership with FrontLine catapults us into a new league and empowers us to create entirely new services with greater value to a dramatically larger client base," Kusin explained. "Historically, there hasn't been a single-source provider for all of the resources these companies require. When we combine the leadership and experience of the management teams, HQ's powerful brand and the services of FrontLine's partner companies, we will level the playing field for emerging businesses."

David Rupert of VANTAS, who will be president and COO of the new company, also touted the deal's revolutionary potential.

"We have the power to provide fast growing companies and mobile work forces with the tools to have a competitive advantage anywhere in the world," Rupert asserted.

"As a combined force, the new HQ will revolutionize the way people work."

HQ Global Workplaces begins its existence with a formidable roster of clients. The combined company's current customers include: 3Com, Ariba, BroadVision, Concur Technologies, Covad Communications, Microsoft, MicroStrategy, Netscape, NorthPoint Communications, Novell, SIEBEL Systems, Sprint, TicketMaster Online, Teligent, and Vitria Technology.

Analysts expect the transaction to be completed by the end of April.