After at least three months of negotiations, Electronic Data Systems Corp. announced an agreement yesterday to sell its subscription fulfillment unit to AMREP Corp., the parent of fellow fulfillment provider Kable News Co. Inc.
The acquisition price is $10 million in cash and assumed liabilities, EDS said, and the transaction is expected to close by the end of the month. EDS also said it expects to net $27 million cash in the deal, which includes $21 million in retained cash and receivables.
With this purchase, Mount Morris, IL-based Kable News' subscription fulfillment division — known as Kable Fulfillment Services — will become the second-largest service provider in that sector behind Communications Data Services Inc., Des Moines, IA, according to a Kable executive.
“Our client count will increase by 40 [percent to] 45 percent to over 800 titles and 60 million subscribers,” said Kable News president Mike Duloc, who added that growth was the key motivation for the acquisition. “What made it attractive was that we were already in the business, EDS was the No. 2 player in the field and it basically gave us the chance to combine the operations and grow this part of our business to a more significant level.”
Duloc said the division has a long history and capable staff, which Kable plans to keep intact at the Louisville, CO, location where it has operated since before EDS owned it.
“We're trying to make the transition as seamless as possible,” he said.
Clients will keep their current representatives to help smooth the process.
For EDS, the sale represents a chance to shed an ancillary division that it said never meshed with its main computer services business.
“EDS has made a strategic decision to evaluate and divest certain units that are non-core to our IT services business,” spokesman Sean Healy said. “Kable News is a company totally focused on the magazine distribution and fulfillment business, and it's acquiring this business to expand its customer base.”
EDS originally announced its intent to sell the division in mid-September, after the company's stock dropped more than 50 percent in value because of low earnings and financial problems plaguing two of its biggest customers, US Airways and Worldcom.
The computer services giant, founded by Ross Perot, bought the fulfillment operation from Neodata in 1997 for $300 million and combined it with several companies it had acquired into its Centrobe division. The Centrobe name, however, was quickly phased out in favor of EDS.
Neodata, founded in 1949 as the subscription fulfillment arm of Esquire magazine, has served publishing clients in the consumer and business magazine and book publishing arena, providing subscription order management, list conversion, payment processing and billing, and label preparation and distribution.