Internet Brands to be acquired for $640M

Hellman & Friedman pay a near 50% premium, and 4x sales; Sale price could bode well for Demand's IPO

Internet Brands, a NASDAQ-listed internet media company, announced Monday that it has agreed to be acquired by private equity firm Hellman & Friedman Capital Partners VI, to the tune of $640 million, nearly 50% above its market price.

Internet Brands stockholders will receive $13.35 for each outstanding share of common stock they own, which comes to a 46.5% premium over the company's September 17 closing price. It's also a price that values Internet Brands at four times its yearly revenue. 

Shares of Internet Brands were up $4, or 45%, in Monday trading.

Idealab, the business incubator that helped Internet Brands get off the ground in 1998, owns 19% of Internet Brands’ outstanding common stock and wields 64% of the company’s voting power.  Idealab is said to have entered into a voting agreement with an affiliate of Hellman & Friedman relating to the merger agreement.  Debt financing commitments have been provided by Bank of America, N.A., BMO Capital Markets, GE Capital, and RBC Capital Markets.

Internet Brands is an online content company that owns and operates more than 100 community and e-commerce websites across a wide swath of verticals, including home, careers, automotive, shopping, travel, and leisure categories.  Websites include Gardens.com, Doityourself.com, Autos.com, Loan.com, and more, and Internet Brands boasts more than 62 million unique monthly visitors and 713 million total page views.  The company also claims on its website that 98% of all traffic is organic (non-paid).

As of July 2010, Internet Brands reported second quarter finances that included $28.1 million second-quarter revenues, a 21% increase from last year’s $23.2 million second-quarter revenues.  The company also reported a 30% year-over-year increase in unique monthly visitors.

Internet Brands CEO Bob Brisco remarked in his blog this morning: “We became a public company three years ago, just as the global financial markets began to falter—and ultimately crater.  We’ve prospered, despite the most difficult economic, financial, and advertising market backdrop in about 85 years.  So, why potentially go private again?  Because we believe this would be a good deal for our shareholders.” 

Today’s announcement will be welcome news to other online media content platforms, like Demand Media, which is looking to go public. 

Demand Media, an online content company, generates content based on a unique algorithm that determines what types of information Internet users are most likely to look for online.  Common key words and search terms are then synthesized into article topics, which address virtually any question a Web user might have on just about any topic, and are published in one of Demand Media’s many websites, including Livestrong.com, eHow.com, Answerbag, and more.  Advertisers can then strategically place ads in an article based on the topic’s key words.   

Demand Media generates 5700 pieces of content per day and has a library boasting over 2 million articles and 200,000 videos.

In August, Demand Media filed its S-1 and was gearing up to raise $125 million through an initial public offering.  Currently, the company has $33 million in cash and expects to see 15-20% revenue growth this year.

Demand Media could not be reached for comment, but if Internet Brands’ acquisition is any indication, it has a lot to look forward to.

Neither Internet Brands nor Hellman & Friedman were available to comment on today’s announcement as well.

Holding Internet Brands to its promise to look out for stockholders, law firm Levi & Korinsky announced this morning that they are investigating whether the Internet Brands Board of Directors breached their fiduciary duties to shareholders by failing to adequately shop the Company before entering into this agreement, and whether Hellman & Friedman is underpaying for Internet Brands shares.  The law firm is explaining their investigation on the grounds that at least one analyst set a price target for Internet Brands stock at $14.00 per share.

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