College discount marketer Student Advantage is striking an alliance with New York-based teen marketer Alloy
, selling off a unit in return for a joint promotion deal.
Through the agreement, Alloy will pay up to $6.5 million to acquire Boston-based Student Advantage’s Events and Promotions group. An undisclosed portion of the payout will be made in cash upfront, while the remainder will be paid if the group meets unspecified performance requirements.
In return, Alloy’s college-focused 360Youth advertising division will promote Student Advantage’s CollegeClub membership and the SA Cash alternative currency card. Specifically, 360Youth will market the services through Alloy’s Web site and other online properties, as well as through print and outdoor.
Student Advantage, which promotes advertisers by offering discounts to its college-aged membership and which is facing a delisting from Nasdaq because of its low stock price, said the sale would help the firm to trim costs and to concentrate on more profitable units.
“Combining forces with Alloy allows Student Advantage to further increase its focus on its high growth, high margin transaction-based businesses, while leveraging the strength of Alloy’s marketing and media reach to the next generation of Student Advantage customers,” said Raymond Sozzi, Jr., the company’s chairman, president and chief executive.
Student Advantage on Thursday said that quarterly sales had fallen dramatically to about 50 percent below the previous quarter, coming in at a below-guidance $10.1 million. After a net loss of $7.6 million, the firm exited the quarter with $3.4 million in cash and marketable securities, which includes a $3 million private equity placement that the firm plans to use to pay down loans.
While the sale of its Events and Promotions unit puts much-needed cash into Student Advantage’s coffers, its new marketing partner beefs up its college marketing capabilities.
Alloy, which has seen a measure of success in expanding from its online publishing background into custom publishing and catalog marketing, last year acquired 360Youth and teenaged-focused offline media buyer CASS Communications for a total of $76 million in cash and stock, boosting its growth into the late-teen market.
Now, by continuing its moves to target the college-aged crowd, Alloy Chairman and Chief Executive Matt Diamond said the firm expects to bring in about $5 million in revenues and $500,000 in pre-tax and pre-amortization earnings, over the next 12 months.
“This strategic alliance further strengthens 360Youth’s leadership position in delivering the nation’s marquee brands to the dynamic youth market,” Diamond said.
