LifeMinders Finds Buyer
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LifeMinders will have a new corporate parent, following a successful purchase of the troubled e-mail marketer by New York-based Cross Media Marketing, in a deal valued at $68.1 million.
The purchase comes just two months after the Herndon, Va.-based LifeMinders announced that it was actively shopping itself for a buyer. In May, the company reported a more than 50 percent drop in revenues due to the advertising slowdown, and said that its prospects were slim for ever turning a profit.
Yet the company's e-mail personalization technology, its database of 20 million opt-in e-mail recipients, and its remaining hoard of just over $50 million in cash, proved enough to woo Cross Media, a direct marketing player bulking up to handle both online and offline business through a roll-up strategy.
Through the deal, Cross Media will pay $68.1 million in cash and stock for LifeMinders' outstanding stock. (That total will drop by $1.75 million if LifeMinders cuts into its $50 million cash pile by the end of August.)
The payment is about $2.43 per share of LifeMinders, a 72 percent premium over LifeMinders' closing price on Wednesday. Cross Media plans to pay for the purchase by restricting the amount of cash it will pay to $12.1 million, which is covered by the company's credit.
While LifeMinders most recently posted a loss of $6.9 million, or $0.29 per share, the merger should support Cross Media's earlier guidance of $100 million in revenues for the year -- a 70 percent increase over last year. Much of the company's revenue growth during the past year and a half has been driven by such acquisitions.
"We believe LifeMinders' extensive consumer database and personalization capability, married to Cross Media Marketing's effective direct marketing operations which contact and retain data on over 20 million consumers annually, create the ultimate marketing solutions provider," said Ronald Altbach, Cross Media's chairman and chief executive.
The news concludes months of effort by LifeMinders to make its personalized e-mail marketing business pay off. In recent months, the company announced sizable restructuring, client contract renegotiation and the abandonment of its wireless service (which it had launched through the purchase of New York-based smartRay in 2000, for $32.5 million in cash and stock).
For publicly traded Cross Media, however, the purchase is the latest in a series of purchases. In January of last year, the company -- then known as Symposium Corp. -- acquired Direct Sales International, a seller of magazine subscriptions. In November, the company bought consumer database ASP WeFusion.com.
But with about $1.82 million remaining in cash after its most recent quarter (in which it reported a loss of $209,844 on revenues of $20.8 million), Cross Media looked to be done with its acquisition run.
Once reinvigorated by LifeMinders' cash reserve, Altbach suggested that Cross Media could continue its string of acquisitions.
"The market has decimated valuations of many companies, including those that are profitable, creating opportunities for consolidation and aggregation on a post-merger basis," he said. "The company will now have the financial strength to complete complementary acquisitions with the bulk of the significant capital generated through this acquisition dedicated to that purpose."
Following the purchase's close in fourth quarter, pending shareholder approval, LifeMinders will continue operating in Herndon, with two seats on Cross Media's board of directors.