NETZERO, JUNO TO MERGE NEW PARENT WILL BE SECOND IN SIZE TO AOL.Byline: Jesse Hiestand Staff Writer WESTLAKE VILLAGE - Two bitter rivals in the battle to provide free Internet access See how to access the Internet. announced a surprising merger Thursday, with NetZero Inc. buying a majority stake in New York-based Juno Online Services Juno client software icon Juno is an Internet service provider based in the United States. It is a subsidiary of United Online, which also owns NetZero and Bluelight Internet Services. Inc. The former competitors, locked in litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. for the past year, now plan to combine their subscribers and slash overhead to create an Internet provider Internet provider - Internet Service Provider second in size in the nation to America Online See AOL. . ``We expect the merger of our two companies to generate significant synergies that will result in increased financial strength, numerous operating efficiencies and an improved user experience,'' said Mark R. Goldston, chairman and chief executive of NetZero. The two companies will become wholly owned subsidiaries Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of newly formed United Online Inc., to be based in Westlake Village, and have significant operations in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. and Hyderabad, India. Goldston will be chairman, president and chief executive of United Online, while Charles S Charles, archduke of Austria Charles, 1771–1847, archduke of Austria; brother of Holy Roman Emperor Francis II. Despite his epilepsy, he was the ablest Austrian commander in the French Revolutionary and Napoleonic wars; however, he was handicapped by . Hilliard, NetZero's current chief financial officer, will hold that position at the new company. Other senior executives from both firms will also have key roles. They hope to convert many of the 6 million people who give up part of the screen to advertisements, in exchange for using Internet services for free, into paying customers. The brands will keep their names, NetZero providing the free access and Juno handling paying customers, of whom there are a combined 1 million. While complementary, the two companies bring unique strengths to the deal, said Charles E. Ardai, Juno's president and chief executive. ``Juno's proven ability to convert free users into paying subscribers will be particularly valuable,'' Ardai said. ``NetZero's demonstrated marketing expertise should help United Online achieve its subscriber-acquisition and revenue-generation goals.'' Both companies gave away Internet access until it became clear that advertising revenue alone could not support such business. Many competitors folded, leading NetZero and Juno to put limits on free access time and to encourage people to pay and get the banner ads removed. Disputes over the banner-ad technology led NetZero and Juno to sue each other. For premium service, Juno currently charges $14.95 per month, while NetZero users pay $9.95. America Online recently raised its rate to $23.90 per month. The all-stock transaction calls for all outstanding shares of the companies to be exchanged for shares of United Online. For each of their shares, NetZero stockholders will get 0.2 shares of United Online, while Juno stockholders will receive 0.357 shares. This has an implied effect of Juno stockholders' getting 1.785 shares of NetZero for each share of Juno. NetZero's stock gained 3 cents on Thursday to close at 95 cents; Juno lost 7 cents to $1.48. The deal, subject to regulatory and shareholder approval, is expected to close by the end of the year, when NetZero stockholders will own about 61.5 percent of United Online's common stock. The goal of the merger is to reduce operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. significantly by eliminating technical redundancies and consolidating billing, marketing and technology development. The new company will have estimated quarterly revenue of $41.5 million - 60 percent from billable services. As of March 31, the companies had a combined cash balance of $209.8 million. The merger is expected to cost at least $20 million in restructuring and transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). . |
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