Quadrangle Logs Into Greenfield Online
Offer includes 50-day 'go shop' period and is 'consistent' with PE firm's focus on media and communications.
June 16, 2008
The Quadrangle Group, a New York private equity firm, has agreed to acquire interactive media and services data gatherer Greenfield Online for $426 million excluding debt.
Quadrangle has secured debt financing to support its purchase of the Wilton, Conn.-based company, which announced the transaction on Monday, at $15.50 per share in cash. The offer, which includes a 50-day “go shop” provision, marks a 17% premium over its previous day close at $13.28 on the Nasdaq on June 13 and a 26% premium above its average closing price for the last 30 days.
“Having followed Greenfield Online closely over an extended period, we became increasingly impressed with its international leadership position in online comparison shopping and survey research, as well as its record of strong growth,” said Gordon Holmes, managing principal of Quadrangle Group, adding in a statement that it “represents an attractive investment opportunity for Quadrangle, consistent with our ongoing focus on the media and communications industry.”
Quadrangle is paying a purchase multiple of roughly eight times Ebitda on a going-forward basis, said a source familiar with the transaction.
Officials from Quadrangle did not return calls by press time.
An interactive media and services company with more than 700 clients that collects consumer attitudes about products and services, Greenfield operates two business units: comparison shopping unit and Internet survey solutions. The company manages Internet portals that collect product and merchant reviews, which are then sold to marketing research companies and corporations.
Albert Angrisani, president and chief executive of Greenfield Online, said he expected the company’s ownership transition would be positive for the company’s business, customers and employees.
Angrisani is expected to remain president and CEO of Greenfield and other managers are anticipated to remain in their current positions.
A $393.7 million market-capitalized company, Greenfield’s share price has declined from $18.49 a share to $10.25 per share over the past year.
“The view is that the online survey business has gotten commoditized,” said Linda Gridley, chief executive of Gridley & Co., a New York investment banking firm focused on information services, commenting on the company’s share price slide.
Following news of the deal, Greenfield’s Nasdaq-traded stock increased 12.7% in afternoon trading to $14.97 a share.
Gridley, whose firm has done some investment banking work in the online comparison shopping space, said the domestic online comparison shopping business hasn’t lived up to its billing in the US as it has in Europe. “In the US, the comparison shopping business has really under performed expectations.”
In May, Stephens analyst Kyle Evans issued a report on Greenfield, noting that the business’ $7.8 million in adjusted Ebitda for the first quarter beat the investment bank’s $7.5 million cash flow estimate. The analyst also said that while the company's Internet survey sales were weaker than anticipated, "encouraging bid volume and booking over the last few months gave management enough confidence to reaffirm prior revenue guidance for the year."
Online comparison shopping, meanwhile, has seen its share of M&A activity in the last three years.
E.W. Scripps of Cincinnati acquired Los Angeles online comparison shopping business Shopzilla three years ago for $560 million, following San Jose, Calif.-based eBay’s $620 million purchase of Israel’s Shopping.com just days earlier. E.W. Scripps, though, is now planning to split its own business into two separate companies, one of which will be named Scripps Networks Interactive and own Shopzilla along with several other businesses.
The acquisition by Quandrangle, meanwhile, isn’t the first time a private equity sponsor has sought to capitalize on the demand for market research. Providence Equity Partners, a Providence, R.I.-based private equity firm, acquired a majority interest in San Mateo, Calif.-based NexTag last year in a deal said to be worth $830 million, following its acquisition of Fairfield, Conn.-based Survey Sampling International in April 2005 from Boston Ventures through a recapitalization.
Boston Ventures, a Boston private equity firm that invests in media companies, retained a 10% interest in Survey Sampling, which it later sold when Providence acquired the rest of the company.
As its concerns Greenfield, the company said its director board has approved the transaction, recommending shareholders vote in favor of the deal.
Dan Rosensweig, an operating principal at Quadrangle, also worked on the transaction, which is expected to close by fourth quarter 2008.
Deutsche Bank Securities is serving as financial advisor to Greenfield Online, while Kirkpatrick & Lockhart Preston Gates Ellis is providing it with counsel. Simpson Thacher & Bartlett is providing legal advice to Quadrangle.
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