RealTime IT News

Alloy Acquires Dan's Competition in $38 Million Deal

By Ryan Naraine

Online/offline direct marketing firm Alloy, Inc. , best-known for selling to teenaged girls, is going equal opportunity in its marketing approach by acquiring Dan's Competition, Inc. for about $38.6 million.

The New York-based Alloy said it would issue approximately 2.1 million shares of stock and pay $11 million in cash to acquire the company, which markets BMX bikes and related equipment to teenage boys through online and offline channels.

The deal also helps Alloy branch out from the woeful online advertising market that has hurt the media segment of its operations.

More recently, Alloy jumped into college and high school market with the $33 million purchase of CASS Communications, which specializes in niche and alternative markets. Before that, Alloy snapped up Carnegie Communications in a cash and stock deal valued at $14.5 million.

Alloy, one of a handful of profitable Silicon Alley Internet companies, is making it clear that branching out beyond the publishing business is the way to go in this tough environment.

Dan's Competition, a five-year-old firm based in Mt. Vernon, Indiana, is a recognized distribution brand in the action sports market. The company's marketing model is built around a Web site and print catalog that targets teenage boys directly.

With the purchase, Alloy gets a database of Generation Y customers to sell BMX-style bicycles, parts, safety equipment, apparel and accessories.

Alloy CEO Matt Diamond said he believes the deal could generate $10 million to $15 million in revenues over the next year, and result in an operating margin in excess of 15 percent for Alloy.

"By combining Alloy's database marketing and circulation management capabilities with Dan's productive database and strong market position, we expect to drive rapid revenue and earnings growth from this business in the years to come."

Alloy products include mail catalogs, Web sites, magazines, college and high school newspapers, and college guides that reach more than 15 million teenagers monthly.