Primedia Projects EBITDA Growth of 40% After Merger With About, Inc.Business Editors NEW YORK--(BUSINESS WIRE)--Nov. 9, 2000 Primedia (NYSE NYSE See: New York Stock Exchange :PRM PRM Partner Relationship Management PRM Parameter PRM Bureau of Population, Refugees and Migration (US State Department) PRM Partidul Romania Mare (Romania Mare Party) PRM Professional Risk Manager ) announced today that its proposed merger with About, Inc. (Nasdaq:BOUT) positions it to produce at least $350 million of consolidated EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become in the first 12 months following the merger, an approximate 40% increase over expected 2000 consolidated EBITDA of approximately $250 million. The deal is expected to close during the first quarter of 2001 and therefore the full-twelve month effect may extend into 2002. The company is holding an investor luncheon to discuss the About merger in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of today at 11:30 a.m. ET. The meeting's formal agenda will begin at 11:45 a.m. ET and will be available on a listen-only basis by teleconference and webcast. To participate in the teleconference, please dial 1-800-711-5301 in the U.S., or 1-785-832-0301 if outside the U.S. The password is PRIMEDIA. Please call in at least 10 minutes prior to the start of the formal agenda. A recorded version will be available two hours after the conference call by calling 1-888-567-0671 in the U.S., or 1-402-530-0413, if outside the U.S. No replay code is necessary and the recorded version will be available until midnight Thursday, November 16, 2000 Investors may also listen to a live webcast of the meeting on Primedia's Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the site, www.primedia.com, or About's Internet site, www.about.com beginning at 11:45 a.m. Copies of the slides will be available on the Primedia site and a playback Playback could mean:
"Our combination with About is going to produce immediate upside Upside The potential dollar amount by which the market or a stock could rise. Notes: This is basically an educated guess on how high a stock could go in the near future. See also: Bull, Downside to our financial results," said Tom Rogers Thomas Andrew Rogers (February 12, 1892 - March 7, 1936) was a Major League Baseball pitcher from 1917 to 1921 for the St. Louis Browns, Philadelphia Athletics, and New York Yankees. , chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Primedia. "Even more compelling is the fact that these projections don't even scratch the surface of this transaction's impact on our strategic development. Right now, we're projecting growth based on the known quantities, the synergies of combining our existing businesses. On this basis alone the merger is very compelling. When we add to the equation that this combination isn't about sticking two companies together and wringing wring v. wrung , wring·ing, wrings v.tr. 1. To twist, squeeze, or compress, especially so as to extract liquid. Often used with out. 2. out the efficiencies, but rather creating a media powerhouse A fourth-generation language from Cognos that was introduced in the late 1970s for midrange computers. It supports both character-oriented, terminal-based applications as well as Windows clients. Applications developed under PowerHouse can be imported into Cognos' Axiant client/server environment. that will continue to evolve, the scenario gets even more exciting. We've added a fast growth engine to our dominant position and that is going to add to everything our shareholders like about Primedia and open the door to new opportunities we would not have absent this merger." "This combination allows us to maximize content and revenue opportunities for About, while providing increased leverage for all existing Primedia properties," said Scott Kurnit, chairman and CEO of About, Inc. "The 700 sites of About are the perfect vehicles to extract enormous new value from Primedia's diverse businesses. Much or our success as the 7th largest web property comes from our leadership in using the unique attributes of the Net for efficient production and distribution. Having woven A woven is a cloth formed by weaving. It only stretches in the Bias directions (between the warp and weft directions), unless the threads are elastic. Woven cloth usually frays at the edges, unless measures are taken to counter this, such as the use of pinking shears or hemming. ourselves into the very fabric of the Net we're now wonderfully positioned to exploit these efficiencies for the large stable of Primedia's print and video assets." Rogers continued, "Primedia will have the flexibility to deliver content and commerce to our customers via print, video, the Internet, live events and e-magazines. Our goal is to give our customers ever-increasing choice of content and various channels of delivery. We will use the extraordinarily efficient About platform to enter new markets. "In 2000, we laid the foundation for this company by integrating our units and turning them into true engines of organic growth. In 2001, our merger with About will supercharge su·per·charge tr.v. su·per·charged, su·per·charg·ing, su·per·charg·es 1. To increase the power of (an engine, for example), as by fitting with a supercharger. 2. and accelerate growth," concluded Rogers. Several key factors regarding the Primedia/About merger are discussed in the following questions and answers: Why are you merging at this time? Our goal is to give our customers more choices of delivery and our advertisers more marketing solutions. There are enormous strategic benefits for a traditional media company and its online mirror image to be combining. It is accretive in the near-term; it takes the growth rate of the company to 40% in the first 12 months after closing and to at least 20% in future years. It takes the most efficient content creator See content provider. and distributor on the web and marries it with the most solid form of traditional advertising, endemic endemic /en·dem·ic/ (en-dem´ik) present or usually prevalent in a population at all times. en·dem·ic adj. 1. revenues, out of which major e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. and consumer and business Internet revenue streams can emerge from the outset. When do you expect the deal to close? Depending upon the amount of time in review at the SEC and then the subsequent About shareholder vote, it could close as early as January 2001. What are your expectations for Primedia for full year 2000? We are on target to meet full-year EBITDA of approximately $340 million from traditional media and EBITDA losses from new media of approximately $90 million, or approximately $250 million of consolidated EBITDA. What are estimates for the combined company in the first 12 months after the deal closes by traditional media and new media? Estimates for the first 12 months after the deal closes are as follows.
($ in Primedia First 12 Month Preliminary
millions 2000 Estimates
except Estimate Total Combined
per share) Primedia About Contingency(a) Synergy Expectation
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EBITDA
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--Traditional $340 $385 ($14) $5 $376
Media
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--New Media ($90) ($78) $19 ($31) $66 ($24)
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Total EBITDA $250 $307 $19 ($45) $71 $352
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Average
Shares 165.1 171.3 48.0 219.3
Outstanding
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After-tax
cash flow $52 $112 $165
----------------------------------------------------------------------
After-tax
cash flow $.31 $.65 $.75
per share
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(a) Based on $80 million revenue contingency.
In which quarter will the EBITDA improvements come after the merger? They will begin immediately but will be loaded toward the third and fourth quarters after the merger. What will be the impact of the merger on 2001? If the closing occurs by the end of the 2001 first quarter, the EBITDA would most likely be around $330 million. Again, this compares to $350 million of EBITDA on a first 12 months following closing basis. It is still accretive to after-tax cash flow. What are your expectations for the second full year of integration? We believe that beyond the first 12 months, EBITDA growth should be sustainable at levels of 20% per year as the salesforce is working well on the integrated sell, new products are introduced and the two companies are totally integrated. What are the underlying assumptions of your $80 million revenue contingency contingency n. an event that might not occur. ? Prior to combining companies, About's plan for 2001 is to grow revenues by 80% to $175 million and Primedia's plan is to double this year's new media revenues to approximately $90 million. We have valued this transaction on a conservative and prudent basis. The $80 million revenue contingency falls into three buckets. First, we are taking a conservative approach to expected revenue growth for the online advertising market in 2001. Second, there will be some revenue reduction from Primedia's new media operations as a result of less cash spending as we integrate certain projects with About. Combined, these two factors amount to approximately $52 million in revenue contingency, which translates into a $31 million EBITDA contingency. Third, there will be some modest training and redeployment re·de·ploy tr.v. re·de·ployed, re·de·ploy·ing, re·de·ploys 1. To move (military forces) from one combat zone to another. 2. "lost revenue" opportunities we previously referenced in Primedia's core business as we integrate the Primedia salesforce. This factor results in a $28 million revenue contingency, which translates into a $14 million EBITDA contingency. This revenue adjustment does NOT reflect any weakness or adjustment to the core Primedia traditional media operations. It was felt that it was prudent to take this revenue contingency so investors could take a far more conservative approach in evaluating this transaction. What are the $49 million of cost cutting synergies? The $49 million of cost cutting synergies during the first year are derived as follows:
1. Reduced PRIMEDIA new media development costs $31 million
2. Reduced PRIMEDIA web hosting and ad serving costs $ 3 million
3. Reduced Primedia and About consumer marketing costs $ 8 million
4. Reduced G&A expenses $ 7 million
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Total $49 million
One of the benefits of this transaction is that investors can point to cost synergies Cost Synergy In the context of mergers, cost synergy is the savings in operating costs expected after two companies, who compliment each other's strengths, join. Notes: The savings in operating costs usually come in the form of laying off employees. , which are generally viewed as more certain than revenue upsides upsides Adverb Informal, chiefly Brit (foll. by with)equal or level with, as through revenge , as comprising two-thirds of the initial synergies in the overall deal. When will the combined new media / Internet operations be profitable? The new media operations of the combined company are expected to be profitable in 2002. The transaction allows the combined new media operations to reach profitability at least one year earlier than the standalone stand·a·lone adj. Self-contained and usually independently operating: a standalone computer terminal. Primedia new media operations. Was Primedia making progress in its online initiatives? Absolutely. GR8RIDE.com, for automotive enthusiasts, apartmentguide.com for apartment shoppers and many of our other consumer and B2B (Business to Business) Refers to one business communicating with or selling to another. See B2B e-commerce, B2C and B2G. B2B - business to business sites are becoming highly trafficked sites that are generating e-commerce and sales leads A sales lead is the identity of a person or entity potentially interested in purchasing a product or service, and represents the first stage of a sales process. The lead may have a corporation or business associated with the person(s). for advertisers. Also, we are spending considerably less cash than anticipated on our new media development. Our sites will only be strengthened by the addition of About. What will be the immediate opportunities for generating revenues from the combined companies? Clearly having the combined advertising sales force of 1,600 selling packages to our 65,000 advertising customers will be the first opportunity. There are also huge opportunities to sell magazine subscriptions on line at a fraction of the cost per subscription of mail solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual . Recently, in a groundbreaking test of media convergence Media convergence is a theory in communications where mass mediums merges together to create a new product offering a variety of the properties of each. Such an example is that of the internet. , leading publisher Time Inc., soon to be part of AOL/Time Warner, announced that it has generated in excess of 500,000 new subscriptions from a cross-promotional test with AOL (A division of Time Warner, Inc., New York, NY, www.aol.com) The world's largest online information service with access to the Internet, e-mail, chat rooms and a variety of databases and services. over a five-month period. During the test, 95% of the subscribers opted for credit card purchase, with 50% of this group selecting to receive evergreen evergreen, term commonly used as synonymous with conifer and applied also to all those broad-leaved plants that bear green leaves throughout the year. Of the latter, most are plants of the tropics, subtropics, and other areas where the growing season is prolonged (e. subscriptions (continuous service). The caveat is that these are beta test A test of new or revised hardware or software that is performed by users at their facilities under normal operating conditions. Beta testing follows alpha testing. Vendors of packaged software often offer their customers the opportunity of beta testing new releases or versions, and the results, and the subscribers are not fully paying customers yet. That said, given Primedia's focus on niche magazine publishing, even a modest improvement in subscriber acquisition cost or renewal rates can have a meaningful impact on our margins. Will Primedia's margins be affected by the transaction? Yes. Our consolidated EBITDA margins will improve because of the inclusion of the more profitable About Internet business. Will Primedia be telling the story to investors? Yes. We will be visiting a series of cities over the next several weeks. For further information, please contact Warren Bimblick, vice president, investor relations Investor relations The process by which the corporation communicates with its investors. at Primedia (212-745-0615 / wbimblick@primedia.com) or Kelly Lofts, director, investor relations at About, Inc. (212-204-1587 / klofts@about.com). Primedia Inc., with 1999 sales of $1.7 billion, is a targeted media company with print, video, and Internet businesses focused on consumer and business-to-business audiences. The Company publishes more than 220 magazines, and owns and operates approximately 300 Web sites and other Internet properties. Primedia's stock symbol: NYSE:PRM. About The Human Internet(TM) About is the Internet's most complete targeted environment for marketers. With more than 700 topic sites, each overseen by a professional Guide, the About Network provides customers with an experience unlike any other on the Web-including the Internet's best link directories, original content, community features and commerce opportunities. Media Metrix (September 2000) ranks About.com as the 7th largest Web Property. More information on the company can be found on its Web site at www.about.com This news release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. concerning Primedia's operations, economic performance and financial condition. These statements are based upon a number of assumptions and estimates, which are inherently subject to uncertainties and contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. , many of which are beyond the control of the Company, and reflect future business decisions, which are subject to change. Some of these assumptions may not materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. , and unanticipated events will occur which can affect the Company's results. This news release contains forward-looking statements that involve risks and uncertainties regarding About. Investors are cautioned that such results or events predicted in these statements may differ materially from actual future events or results. Factors that could cause actual events or results to differ from anticipated events or results include the company's limited operating history, history of losses and anticipation of continued losses, potential volatility of quarterly operating results, and other risks that are contained in About's reports and documents filed from time to time with the Securities and Exchange Commission. |
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