Cross Media, LifeMinders Shareholders on Roller Coaster

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Shareholders of Cross Media Marketing Corp. and LifeMinders Inc. found themselves on a roller coaster ride in October thanks to a takeover battle that saw offers and counteroffers for LifeMinders. In the end, Cross Media Marketing, a multichannel marketer, won the battle and on Oct. 25 closed its merger with LifeMinders.


LifeMinders, which sends personalized e-mail messages based on consumers' interests and preferences, has about 20 million members.


"After carefully reviewing many proposed transactions, our board concluded that a merger of LifeMinders with Cross Media Marketing met the board's previously established guidelines and is in the best interest of LifeMinders' stockholders," said Jonathan Bulkeley, LifeMinders' chairman/CEO.


Cross Media Marketing's shares traded at a high of $8 on Oct. 2. When the merger closed on Oct. 24, the company's shares were at $6.95.


LifeMinders' shares rose steadily throughout the month, hitting $1.48 on Oct 1 and closing at $1.95 on Oct. 24.


In July, Cross Media Marketing announced its acquisition of LifeMinders for $68.1 million in cash and stock. The cash portion of Cross Media Marketing's offer originally was for $12.1 million.


That offer was quickly countered by Encore Marketing International, which offered about $64 million in cash and stock. The cash part of Encore Marketing's offer was $34.9 million. But the LifeMinders board of directors did not view the Encore Marketing offer as superior to Cross Media Marketing's and rejected it.


Under the revised terms of the acquisition, Cross Media Marketing increased the cash available for payment to LifeMinders' stockholders to $24 million and raised the stock exchange ratio to 1.29 shares of Cross Media common stock from 1.23 shares.


Ronald Altbach, Cross Media Marketing's chairman/CEO, said the company hopes to acquire more than 1 million new members in the next two years at price points ranging from $40 to $200 per year.


"We'll go on a fairly aggressive new-member search to build up membership," he said.


Altbach said that with LifeMinders' database and technology, Cross Media Marketing will be able to reduce its customer acquisition costs and deliver new services regularly.


Also on Oct. 24, Cross Media Marketing announced a program to increase institutional ownership in the company's shares and instituted a 1-for-5 reverse share split. Beginning Oct. 25, every five shares of Cross Media Marketing common stock was converted into one share.


"It should be clear to anyone that has studied our remarkable young company and the significant growth we have undergone [that] it is important for management to prepare the company for potential institutional investors who are in the business of identifying undiscovered, high-growth companies," Altbach said. "We believe that by effecting a reverse split, we will be far better positioned for their participation in our growth."


Raymond Moore, an analyst with Weatherly Securities, said the LifeMinders acquisition "makes good strategic sense" for Cross Media Marketing.


"The company appears poised to generate significant earnings growth, which we believe could be in the 25 percent per annum area," Moore said in a recent report. "The LifeMinders purchase will alter revenue and expenses, but ... per share projections should remain in tact."


He noted that Cross Media Marketing maintains that through a combination of internal growth and acquisitions, its revenue could increase from $100 million in 2001 to between $400 million and $500 million by 2004.


"Cross Media Marketing is still in early development and a costly but strategic acquisition could increase its value as a takeover candidate, a development we consider likely," Moore said.


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