Jupitermedia Corp. (NASDAQ: JUPM) is seeing a massive surge pre-market, and this may help the company adequately fend off many of its issues. The company has announced that it has entered into a "definitive stock purchase agreement to sell" its Online Images business to Getty Images, Inc. for an aggregate purchase price of $96 million in cash.
Private equity firm Hellman & Friedman owns Getty Images after taking it private earlier this year. If you will recall, the two companies had been in merger talks in the past for far higher prices. Those talks quickly broke apart.
Jupitermedia’s board of directors has approved the transaction and hasrecommended that shareholders approve the deal as well. This issubject to shareholder approval as you can tell, but the deal also hasto clear regulatory approval and customary closing conditions. WithMr. Meckler and certain holders, the company said it already has 35.9%of the outstanding votes lined up to agree to the deal.
Jupitermedia will retain ownership of its Peoria, Illinois building andproperty and will in turn lease the facility to Getty Images after thetransaction. Jupitermedia said that it expects to incur a non-cashloss of approximately $95 million upon the closing of the transaction.
So what will be left at Jupitermedia? Jupitermedia will continue to operate its Online media business of five networks: internet.com and EarthWeb.com for IT andbusiness professionals; DevX.com for developers; and Mediabistro.comand Graphics.com for media and creative professionals.
While this will result in a huge charge, the company says that thiswill allow it to repay all of its bank debt. As of yesterday’s close,its market cap was a mere $19.6 million. As of June 30, the companyhad only about $7.3 million in cash and long-term investments, and ofits total assets of $280.1 million it had more than $210 million asgoodwill and intangibles. Of its $123.7 million in total liabilities,$79 million was direct long-term debt. This will result in a massiveshrinking of the balance sheet, but it will also remove the distortionof past carrying values and intangibles to reflect an easier tounderstand set of books.
Traders are really responding favorably here. Shares closed yesterdayat $0.54 and the 52-week trading range is $0.39 to $5.99. Shares areup more than 80% at $1.00 in pre-market trading. This will be gettingrid of a large portion of the business and may be for a far less pricethan what the stock photo business would have fetched in the past, butit also turns the company into a niche content player with no real debtand a much cleaner operation.
Jon C. Ogg
October 23, 2008