United Online has one helluva Internet portfolio: Classmates.com, MyPoints, NetZero, Juno and now FTD, a florist. If you're looking for synergy you won't find it here.
Under the terms of the merger agreement, FTD stockholders will receive $7.34 in cash, 0.4087 of a share of United Online common stock ("United Online Stock") and $3.31 principal amount of United Online 13% senior secured notes due 2013 (the "Notes") for each share of FTD common stock in the merger, for a total value of $15.08 per share of FTD common stock based on United Online's closing stock price of $10.83 on April 29, 2008. The total consideration to FTD stockholders will be approximately $456 million, consisting of $222 million in cash, 12.35 million shares of United Online Stock and $100 million aggregate principal amount of Notes. The remaining purchase price consists of repayment of FTD indebtedness and expenses incurred in connection with the transaction. Upon closing of the transaction, the former FTD stockholders will own approximately 15% of United Online.
Under the terms of the merger agreement, United Online may elect to increase the per share cash consideration payable to FTD's stockholders by $2.81 in full substitution of the Notes, in which case FTD stockholders will receive a total of $10.15 in cash and 0.4087 of a share of United Online Stock in exchange for each share of FTD common stock in the merger, or a total value of $14.58 per share of FTD common stock, based on United Online's closing stock price of $10.83 on April 29, 2008. In such case, the total consideration to FTD stockholders will be approximately $440 million, consisting of $307 million in cash and 12.34 million shares of United Online Stock.
Luckily, United Online explains the FTD deal for us. The company says FTD will give United Online a "significant increase in scale." Sure the company will have $1.14 billion in revenue once FTD is added in, but the interplay between United Online's units is a bit fuzzy.
Among other reasons for this match made in floral heaven:
- Diversification of revenue streams. Hard to argue with that point.
- "Attractive financial characteristics." United Online will have recurring cash flow (maybe it doesn't matter if strategically the FTD deal is misunderstood).
- United Online reaches an attractive market. And it gets to compete to Proflowers.com and 1-800-Flowers.
- United Online can use its marketing expertise to get you to buy more flowers.