Reuters FTD to Be Acquired in $420 Million Deal Monday October 6, 4:08 pm ET
NEW YORK (Reuters) - FTD Inc. (NasdaqNM:FTDI - News), one of the world's biggest flower product delivery services, said on Monday it will be acquired by a private equity fund in a deal worth about $420 million.
Although FTD has been losing market share to 1-800-Flowers (NasdaqNM:FLWS - News) and other rivals, it was nevertheless an attractive target for acquisition because its business entails little risk, according to one analyst.
"FTD has no inventory," Eric Beder, an analyst with Northeast Securities, noting that FTD is a service provider linking about 20,000 members and other retail locations offering floral products in the United States and Canada.
FTD stockholders will receive $24.85 per share in cash on the closing of the deal, expected by the first quarter of 2004. FTD's board and principal shareholders, who own about 72 percent of the company's common stock, have voted in favor of the deal.
Equity financing was committed by an affiliate of Leonard Green & Partners, a private Los Angeles-based merchant banking firm, through Green Equity Investors IV L.P., a $1.85 billion private equity fund. Debt financing was committed by Credit Suisse First Boston and UBS AG.
Robert Norton, FTD's chief executive officer, will remain in that job after the merger. Norton will exchange a portion of his equity holdings in FTD for equity in the surviving company, and other members of FTD management will be offered the opportunity to participate in similar exchanges.
The deal is subject to government and shareholder approvals.
In addition to its member florists, FTD connects about 29,000 additional florists through affiliated or related organizations in 150 countries.
By comparison, 1-800-Flowers has an inventory consisting of about 50 percent flowers and the rest is gifts, such as home and garden products, silverware or even jewelry.
The floral business has not been increasing as much as the gifting industry, said Beder. "When the economy is slow, people tend to stop buying flowers, it's a discretionary purchase."
But, he said, because of FTD's role, TAKING A COMMISSION on purchases BETWEEN CUSTOMERS and LOCAL FLORISTS, it was not open to risks inherent to a product as perishable as flowers. "THE RISK IS ALL WITH THE FLORIST, NOT FTD."
Arvind Bhatia, an analyst with Southwest Securities Inc. in Dallas, said the FTD announcement did not come as a surprise since there were noises for some time that the company was interested in gaining capital.
"The market anticipated this as the premium is barely above Friday's closing price," he said. FTD stock closed up 25 cents, or 1 percent, at $24.56 on the Nasdaq.
FTD is the fifth take-private transaction by Leonard Green and comes amid a spate of similar transactions for small cap companies that have been all but abandoned by Wall Street analysts.
"It has a very unique market position, very strong management and the barriers to entry are huge," said Peter Nolan, managing partner of Leonard Green, which has about $3.7 billion under management.
Nolan said FTD management sought investors for the transaction, with Goldman Sachs conducting a "limited auction" for the company.
--------------------------------------------------------------------------------
NEW YORK (Reuters) - FTD Inc. (NasdaqNM:FTDI - News), one of the world's biggest flower product delivery services, said on Monday it will be acquired by a private equity fund in a deal worth about $420 million.
Although FTD has been losing market share to 1-800-Flowers (NasdaqNM:FLWS - News) and other rivals, it was nevertheless an attractive target for acquisition because its business entails little risk, according to one analyst.
"FTD has no inventory," Eric Beder, an analyst with Northeast Securities, noting that FTD is a service provider linking about 20,000 members and other retail locations offering floral products in the United States and Canada.
FTD stockholders will receive $24.85 per share in cash on the closing of the deal, expected by the first quarter of 2004. FTD's board and principal shareholders, who own about 72 percent of the company's common stock, have voted in favor of the deal.
Equity financing was committed by an affiliate of Leonard Green & Partners, a private Los Angeles-based merchant banking firm, through Green Equity Investors IV L.P., a $1.85 billion private equity fund. Debt financing was committed by Credit Suisse First Boston and UBS AG.
Robert Norton, FTD's chief executive officer, will remain in that job after the merger. Norton will exchange a portion of his equity holdings in FTD for equity in the surviving company, and other members of FTD management will be offered the opportunity to participate in similar exchanges.
The deal is subject to government and shareholder approvals.
In addition to its member florists, FTD connects about 29,000 additional florists through affiliated or related organizations in 150 countries.
By comparison, 1-800-Flowers has an inventory consisting of about 50 percent flowers and the rest is gifts, such as home and garden products, silverware or even jewelry.
The floral business has not been increasing as much as the gifting industry, said Beder. "When the economy is slow, people tend to stop buying flowers, it's a discretionary purchase."
But, he said, because of FTD's role, TAKING A COMMISSION on purchases BETWEEN CUSTOMERS and LOCAL FLORISTS, it was not open to risks inherent to a product as perishable as flowers. "THE RISK IS ALL WITH THE FLORIST, NOT FTD."
Arvind Bhatia, an analyst with Southwest Securities Inc. in Dallas, said the FTD announcement did not come as a surprise since there were noises for some time that the company was interested in gaining capital.
"The market anticipated this as the premium is barely above Friday's closing price," he said. FTD stock closed up 25 cents, or 1 percent, at $24.56 on the Nasdaq.
FTD is the fifth take-private transaction by Leonard Green and comes amid a spate of similar transactions for small cap companies that have been all but abandoned by Wall Street analysts.
"It has a very unique market position, very strong management and the barriers to entry are huge," said Peter Nolan, managing partner of Leonard Green, which has about $3.7 billion under management.
Nolan said FTD management sought investors for the transaction, with Goldman Sachs conducting a "limited auction" for the company.
--------------------------------------------------------------------------------
