The resulting efficiencies will help L90, which has suffered from the online ad slowdown, attain profitability, executives said during an investor conference call.
In addition, the merger will add more than $2 million in net income to the eUniverse balance sheet in the first year, according to CEO Brad Greenspan. That money will come from cost savings, and from incremental revenue estimated at $10 million to $15 million.
The deal calls for stockholders to get between $2 and $2.20 per share in cash, a 33% premium above recent stock levels, executives said. However, the payment will be made in two parts.
The first component will be a special cash distribution by L90 prior to the merger totaling between $1.80 and $2 per share. That amount would be based on the amount of cash held by L90 and the value of certain balance-sheet items. In the second part, eUniverse would acquire all of the outstanding shares for a price of roughly $.20 per share or a total $5.1 million. However, eUniverse's net cash outflow will total only $2 million because L90 will leave $3.1 million in the company to satisfy liabilities. L90 now has roughly 25 million undiluted shares, meaning that the final price will range between $50 million and $55 million, executives said. Asked by analysts how L90 will get rid of its operating losses, Greenspan noted that the firm is "in the process of divesting certain businesses that chew up some of its cash." In addition, he said, "We have a plan to_combine it with our business." EUniverse hopes to take on 70 to 80 full-time L90 employees, while integrating back-office functions. Both firms are located in Los Angeles. The eUniverse network includes such Web sites as Flowgo (www.flowgo.com) Madblast (www.madblast.com) and Cupid Junction (www.cupidjunction.com). The firm also reaches more than 50-million subscribers through e-mail newsletters. L90, an Internet advertising firm, offers ad programs, opt-in e-mail, e-mail newsletters and a suite of digital marketing tools. Last year, the firm acquired Novus List Marketing, a Valhalla, NY-based list management firm. EUniverse plans to use L90 Direct, L90's direct marketing and list management division, as a distribution channel for its e-mail network. The firm's e-mail newsletters and online database services will also be offered through L90Direct. Several eUniverse Web products, like Cupid Junction Fitness Heaven, will also be offered to the 100 Web sites in the L90 network. Asked why L90's board chose to sell now, CEO John Bohan answered that it is "difficult for L90 to achieve the scale to make the business model work from a financial perspective," said CEO John Bohan during a conference call. He added that "L90 has outperformed many competitors, but it is not immune" from market challenges. Greenspan noted that eUniverse looks for one of three things in an acquisition: assets to better monetize properties, new distribution channels, and new revenue streams. "L90 brings all three of those," he said.