United
Online, the provider of Internet access through NetZero and Juno brands
as well as operator of the loyalty website Mypoints.com and social
networking website Classmates.com, agreed to buy the Floral and gifts
reseller FTD Group for $800 million. Under the terms of the
agreement, FTD shareholders will receive $7.34 in cash, 0.4087 of a
share of United Online Stock and $3.31 principal amount of United
Online 13% senior secured notes due 2013 for each share of FTD stock.
United Online has the option to substitute the senior secured note with
an additional cash payment of $2.81 to FTD shareholders.
The
combination of selling flowers and providing Internet Service is an
unusual mix. United Online feels the acquisition of FTD will increase
the Company’s scale and diversify their revenue stream. United Online
anticipates the deal to be accretive to EPS by second quarter of 2009
and sees opportunities in cross marketing FTD’s products through the
websites and Internet service that they currently operate.
While
I fail to see a large scale of synergies created in this combination, I
do think this is a positive move for United Online. First, the instant diversification
of revenue stream is a huge benefit for United Online whose current
source of revenue from providing Internet access is slowly shrinking.
Next, selling flowers and gifts should be a reliable source of cash
flow to service the new debt and paid the reduced dividend to
shareholders. Finally, putting the company’s excess cash to
work to improve the Company’s earnings is better than
collecting interest.
News of the deal, helped moved FTD shares up closing the day (4/30/08) at $13.75. The
price is still a 9% discount to the $15.01 value assumed under terms of
the transaction of $7.34 cash, 0.4087 of a share of UNTD and $3.31
senior note. While the final terms of The United Online 13% senior
secured notes due 2013 that may be issued to FTD shareholders is not
yet available, the notes look attractive with high interest rate and
short maturity. As well as the fact that the note will be issued by a
Company with a strong cash flow to service the debt.
Find more details on the acquisition of FTD Group at http://www.willtheymerge.com/Ftd.php
Will
They Merge? is dedicated to publicly traded Mergers and Acquisition
deals. The site monitors recent publicly traded acquisitions, post
relevant links to the deal information and allow users to vote if they
think the deal will be successful.
http://willtheymerge.com
Full
Disclosure I hold both UNTD and FTD stocks and as a shareholder urge my
fellow UNTD shareholders to send flowers to their mom on mother’s day
through FTD and my fellow FTD shareholders to look for their old
classmates at classmates.com