LifeMinders Inc., the once high-flying Herndon online direct marketer that laid off most of its workers this year, was bought yesterday by Cross Media Marketing Corp. of New York.
In a cash and stock deal, Cross Media said it would pay $68.1 million for outstanding shares of LifeMinders stock. That amounts to $2.43 for each share of LifeMinders stock, a 47 percent increase over its closing price on Nasdaq of $1.65 a share yesterday.
Despite a database of 21 million customers to whom it sends e-mail messages, LifeMinders never made money. The company signaled in March when it reported a first-quarter loss of $13 million that it was considering a sale, merger or liquidation.
The company relied on targeted advertising to subscribers for its revenue.
“What we realized is that this wasn’t a stand-alone business, that it was really best utilized as part of something else,” said Jonathan Bulkeley, chairman and chief executive of LifeMinders.
Mr. Bulkeley was appointed chairman and CEO in January, replacing founder Stephen R. Chapin Jr., who was given a $1.1 million severance after stepping down. Mr. Chapin had started the company in August 1996.
LifeMinders went public in November 1999, raising $61.7 million. It raised another $85.9 million in a secondary offering in February 2000. Its stock hit a high in 1999 of $62.50 a share and a high in 2000 of $94.81 a share.
But it didn’t make money either year.
It lost $109.5 million in 2000 on revenue of $53.9 million compared with losses of $32.8 million on revenue of $14 million in 1999.
LifeMinders bought four companies last year for $70.5 million in cash and stock.
Cross Media bought LifeMinders to boost its direct-marketing efforts. It markets products including magazine subscriptions and club memberships over the telephone and through the mail. Now it can market products to LifeMinders subscribers, Cross Media Chairman and Chief Executive Ronald Altbach said.
“This acquisition represents a combination of a company that sells products with a company that has customers we can sell to,” he said.
LifeMinders also was attractive because it has $52.3 million in cash on hand, and Mr. Altbach said the combined company could use that money to make more acquisitions.
But if LifeMinders has less than $50 million in cash and cash equivalents on Aug. 31, Cross Media will cut its purchase price by up to $1.75 million.
Under the terms of yesterday’s deal, each LifeMinders shareholder will be able to receive cash, stock or a mixture of cash and stock for his LifeMinders shares. But Cross Media won’t pay more than $12.1 million in cash for LifeMinders stock.
Shareholders will receive 1.22 shares of Cross Media stock for each share of LifeMinders stock.
Mr. Bulkeley owns 1.85 percent of LifeMinders. LifeMinders President, Allison H. Abraham, said Mr. Bulkeley will convert his LifeMinders holdings into shares of stock in Cross Media.
Excelsior Private Equity Fund, FBR Technology Venture Funds and ABS Ventures are the major shareholders of LifeMinders common stock, owning a combined 32.97 percent of the company.
Just 35 persons work at LifeMinders now, down from 200 employees at the end of last year. The company laid off workers in January and May. Cross Media, which had 233 employees at the end of last year, has eight workers at a Rosslyn office. Employees at Cross Media and LifeMinders will join in one office, though the companies said they haven’t decided where to select a new location.
The companies are expected to close the deal during the fourth quarter, and shareholders and regulators still must approve the deal. When the purchase closes, two members of the LifeMinders board of directors will join the Cross Media board.
Cross Media, founded in 1997, reported first-quarter net income of $920,809 on revenue of $20.9 million compared with a loss last year of $1.9 million on revenue of $12.6 million.
The combined company would trade on the American Stock Exchange under the symbol XMM. Cross Media closed yesterday at $1.93 a share, down 6 cents.