BlueMountain Quietly Goes for $35M

While the world's attention was riveted to the terrorist attacks, few took note of an announcement made Sept. 13 that had bought rival online greetings card service from Excite@Home Corp. for $35 million in cash.

It was only in December 1999 that At Home Corp., Excite@Home's parent, paid $780 million, $350 million of that in cash, to buy out the owners of

"I think both sides feel that we got fair market value," said Dave Poplar, investor and media relations manager at American Greetings Corp., Cleveland. "It was basically an opportunity to become the market leader in online greetings, and we thought it was too good of an opportunity to pass up, basically."

The sale comes a month after Excite@Home auditor Ernst & Young LLP warned that its client lacked the financial reserves to survive past the end of the year. The sale can therefore qualify as a distress sale.

"It helps bolster our cash position, and it helps lower our operating costs, and it helps us, the company, focus on broadband," said Estela Mendoza, spokeswoman at Excite@Home, Redwood City, CA.

Excite@Home's broadband services reach 4.7 million homes nationwide, making it the market leader. AT&T Corp. is its largest shareholder.

But Excite@Home, whose chief online property is the portal, has never turned a profit since it was founded in 1995. In fact, it has racked up more than $1 billion in debt. Revenue for the year ended June 30 was $611 million.

"Well, we had said in a past announcement that we were reviewing the sale of media business properties," Mendoza said. "They're no longer in line with our corporate business. Our corporate business is broadband, and this is a narrowband feature."

Excite@Home bought at a particularly extravagant time for acquirers of online properties.

According to a Web M&A Report put out in January 2000 by, acquirers spent seven times more money buying Web sites in 1999 than they spent in 1998.

"Obviously there's been a decline in the market value and decline in advertising sales," Mendoza said. "But we believe we paid a fair market price [for at the time]."

She clarified that the Sept. 13 announcement date, two days after the terrorist attacks, was not intended to mask the sale of

"It's a material announcement, and they had to do it before the [stock] market opened, and we didn't have any confirmation as to when the market would open," Mendoza said.

For, the acquisition is a shot in the arm. is a wholly owned subsidiary of the $2.5 billion American Greetings Corp., the leading player in the greeting cards market along with Hallmark Cards Inc.

"We think that it'll expand our revenue opportunities over several categories, basically," Poplar said. plans to reach profitability in the fourth quarter of this year. The site garners revenue from ads, paid content, e-commerce and business-to-business marketing services.

Earlier this year, bought the Egreetings network comprising and This helped catapult the company to traffic leader status in electronic greetings.

Now, with, that lead is solidified. The combined reach of,, and will cross 100 million unique visitors annually. will account for half of that.

As a network of sites, American Greetings is now in the top 10 most trafficked, according to Nielsen//NetRatings.

As with any acquisition of this kind, integration and cross-marketing possibilities abound. Excite@Home has agreed to buy $3 million in advertising on and These ads will promote the Excite network.

In addition, will be the preferred provider of online greetings for the Excite sites as part of a three-year arrangement.

"There are going to be changes, but right now for competitive reasons, we're not getting into the specifics of what they are," Poplar said.

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