Thane International Inc., an $80 million DRTV marketing company in La Quinta, CA, took a first step toward an initial public offering last month with its hiring of investment bank Bancamerica Robertson Stephens as a financial adviser.
The bank is assigned with the task of identifying potential investors in the company and merger and acquisition targets that would diversify the company's business interests.
“We're looking at a timeline of six to 18 months for an offering,” said William F. Hay. “We also want to buy projects that grow our business.”
Although Hay had told DRTV News last September that he expected the company would go public by last month, he said in a recent interview that the offering was delayed because he wanted the company to be bigger and more diversified.
Thane has several hit products on the air right now, including the BioSlim weight-loss system and the Orbitrek elliptical exercise device. The Orbitrek is now being shipped into overseas markets, where Hay said it is “much bigger seller than we thought it would be.” The company anticipates its total sales will grow to $100 million by the end of this year.
While a public offering would give the company more liquidity in any future merger and acquisition deals, the company wants to avoid the strategy pursued by National Media Corp., the publicly traded infomercial marketing company that has lost money for more than a year. National Media was flush with cash from its hit product, the Ab-Roller Plus, and went on an acquisition binge which proved to be very costly. It bought Positive Response Television, a DRTV company in Sherman Oaks, CA, only to scale back its operations about a year later. It also purchased large amounts of media inventory that it couldn't fill with winning shows.
Hay said that instead of hiring more people and building up an in-house infrastructure of fulfillment operations, media inventory and telemarketing operations, he would seek money-making projects. Thane now employs 31 people.
“Many companies in the infomercial industry built up large cost structures that they couldn't sustain,” Hay said. “We want to keep our cost structure in line with our business and not put ourselves into peril. We want to buy revenue streams, not cost structure.” The company acquired Appletree Dating System in February, an electronic dating service that Hay said makes money.
“We don't put all our eggs into one basket,” Hay said. “We want to develop businesses that have a back end and can be maintained with continuity programs.”
The infomercial industry is littered with companies who scored a few hit shows, only to topple within a matter of years. It was only a year ago that Kent & Spiegel Direct Inc., Culver City, CA, was considered a high-flyer with its Sobakawa Pillow product that generated $70 million in sales. Last month, it laid off most of its staff amid rumors that bankruptcy was imminent.
Thane may now be considered the third-largest buyer of infomercial media, after National Media Corp. and Guthy-Renker Corp., Palm Desert, CA. It expects to spend about $30 million on media this year, which is about 5 percent of the total infomercial media marketplace. It has an in-house production company called Xebec Productions which is overseen by Denise DuBarry, Hay's wife, and its Web site business generates about $1 million in annual product sales.
Hay said his company has a stable management team, despite its dismissal last autumn of its chief financial officer. Hay said that because the company needed someone that had experience in running a company whose sales exceeded $100 million a year and was publicly held. Its vice president of finance, Diane Belcher, used to work for Big Six accounting firm Ernst & Young and for real estate developer Trammel Crow. The company's controller, John Coldun, previously worked for Emerson Electric Corp., St. Louis, and for telco Cincinnati Bell.
“We have the management team in place to take this company to the next level,” Hay said. “We also have no debt and we're not being sued by anyone.”