Hoover’s defends D&B takeout price

Hoover’s defends D&B takeout price

Byline: David Shabelman

Online business information provider Hoover’s Inc. is defending the $117 million purchase price the company received from financial information publisher D&B Corp. on Thursday, Dec. 5., after some investors complained about the offer.

Short Hills, N.J.-based D&B — which changed its name from Dun & Bradstreet one year ago — will pay $7 in cash for every share of the online firm. While the deal value is $117 million, D&B will pay only $81 million when taking into account Hoover’s $36 million cash position.

However, during D&B’s conference call to discuss the deal, two Hoover’s shareholders voiced their displeasure with the terms.

John Lewis, a shareholder from Webster Capital, argued that the $7-per-share offer was only a “10-cent premium” to where Hoover’s stock was trading in September. Hoover’s traded as high as $6.84 on Sept. 12. Its shares have tumbled since then and closed at $5.35 on Thursday. The deal was announced after the markets closed.

Another shareholder termed the offer price “grossly inadequate” and said shareholders “would be looking for a much higher price.” Hoover’s officials did not participate in the conference call, but Frank Milano, investor relations manager with Hoover’s, defended the offer price in an interview.

Milano noted that the $7 offer price was a 32% premium to where Hoover’s shares closed on Wednesday. Based on the company’s 12-month trailing earnings of 8 cents a share, the price is 87 times profits, he added.

Shareholders will have the final say when they vote on the deal.

“We think this is a fair deal or we wouldn’t have taken it to the board for a vote,” said Milano.

Austin, Texas-based Hoover’s provides industry and market intelligence on public and private companies to sales and marketing professionals. The company had revenue of $32 million for the 12-month period ending Sept. 30 and turned a profit of $1 million in that period. D&B said it expects to double Hoover’s revenues by 2005.

Hoover’s Online is the fastest-growing component of the company’s business, offering a subscription-based editorial database covering more than 18,000 public and private companies worldwide. Those revenues accounted for 81% of the company’s total revenue in its fiscal second quarter that ended Sept. 30.

Milano said a combination of Hoover’s and D&B would be much more powerful than Hoover’s as a stand-alone company and encouraged investors who want to take part in the growth of Hoover’s to buy D&B stock.

“The intent is to fuel and accelerate growth by aligning with them,” he said. “When you look at our strategies, they’re naturally aligned.”

In the conference call, D&B CEO Allen Loren said the company expects to accelerate Hoover’s growth by expanding distribution through its current customer contacts. D&B expects the transaction to add to earnings beginning in 2004.

“This is actually a beautiful play because we have a business model that works well and, with more leads, can work even better than it has in the past,” Loren said.

Loren said Hoover’s was a “natural fit” for D&B, which also has been shifting its emphasis to the Web. He said Web-based business accounted for 59% of D&B’s revenue in the third quarter, compared with 32% in the third quarter of 2001.

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