Shares of infoUSA common stock closed at $11.74 yesterday, a gain of 24 percent, less than 24 hours after it received an offer from the company's chairman/CEO to buy the rest of the shares and take the company private.
Meanwhile, MarketWatch reported yesterday that Standard & Poor's Ratings Services placed the BB credit and senior secured debt ratings of infoUSA on CreditWatch with negative implications. S&P said the move reflects the “potential for a substantial increase” in the company's debt levels after the takeover offer.
Vin Gupta & Co. LLC is controlled by Vin Gupta, who owns 38 percent of infoUSA's common stock. The proposal would have him pay $11.75 in cash for each outstanding share he does not own. The offer values the company at $630 million. The company's stock closed at $9.40 Monday.
“In this transaction, I would contribute my entire equity ownership interest in infoUSA,” Gupta wrote in a letter to infoUSA's board of directors. “The funds necessary to provide for the cash portion of this transaction would be obtained solely from debt financing, so that I do not intend to have any other equity investors in this transaction other than certain members of management. I and our financial advisors have had confidential discussions with several global financial institutions and we are confident that this transaction will be completed expeditiously and consistent with the terms proposed herein.”
Gupta's letter said the transaction could be completed within 90 days.
On June 8, infoUSA, Omaha, NE, revised its revenue and earnings guidance for fiscal 2005 because of what it called weakness in revenue of its Donnelley Marketing unit and its small business group. Two days earlier, it said it would discontinue its wholesale pricing discount structure effective July 1, taking discounts from the 80 percent to 90 percent range to 30 percent.
In that announcement the company said, “The average price of circulation and response lists is $120 per thousand or higher. InfoUSA's average list price on business lists is $80 per thousand and on consumer lists is $45 per thousand. InfoUSA spends over $40 million in compiling and updating its various databases. It is no longer a commodity as it was in the past.”
All this followed what seemed to be a strong first quarter for infoUSA. Profit more than doubled to $9.06 million versus $4.37 million in first-quarter 2004 as net sales rose to $95.1 million from $80.8 million, according to the company's earnings report. Operating income was $15.6 million, up from $9.2 million for the first quarter of the prior year.
At the time, infoUSA attributed its revenue growth to sales of its recently launched subscription products and successful integration of recent acquisitions. The company bought retention-based e-mail technology firm @Once in February. It made several acquisitions in 2004, including service bureau Triplex Direct Marketing, business data firm OneSource Information Services and list firm Edith Roman Associates.
Kristen Bremner covers list news, insert media, privacy and fundraising for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters
