Media company Internet Brands announced Monday that it has agreed to go private for $13.35 per share. The private equity sponsor is Hellman & Friedman Capital Partners.
Internet Brands (INET) launched its initial public offering in November 2007. With the onset of the credit crunch, the timing was tough. The company expected to fetch $10 to $12, but was only able to price the deal at $8.
Those investors who took a leap of faith, however, just got a juicy 67% return.
Had they invested in the S&P 500 during the same period, their investment would have declined 10%.
Caught in the Bursting Dot-Com Bubble
Internet Brands got its start in the heyday of the dot-com bubble in 1998. The original property was CarsDirect.com, which was a fast-growing Internet retailer of autos.
However, the financials were scary. In 1999, CarsDirect.com posted $15.17 million in revenues and had a net loss of a whopping $72.3 million. A big part of the expenditures came from advertising, which amounted to $33.4 million.
CarsDirect.com needed huge amounts of capital. To this end, the company filed for a public offering in 2000, but had to cancel its offering as the dot-com bubble burst. Management needed to seriously rethink the company's business strategy.
This meant creating a company with a portfolio of sites across verticals like travel, e-commerce and home improvement. With this goal, the company changed its name to Internet Brands and put together a sound acquisitions strategy. It developed a profitable financial model and built a platform to integrate deals.
The new strategy paid off. Internet Brands now has over 100 sites that attract roughly 62 million unique visitors per month. Much of them come from non-paid sources, such as search engine optimization.
In the latest quarter, Internet Brands posted revenues of $28.1 million and net income of $4.6 million. What's more, the EBITDA margins come to 43%. In other words, Internet Brands has an excellent profile for a private equity deal.
The company will likely continue its deal-making. This may actually be easier as the economy remains slow and independent Internet sites need to scale back their operations. Hellman & Friedman, which has invested in companies like Getty Images and DoubleClick, should be a good partner.
It's a good bet that Internet Brands will be back in the public markets within a couple years. And in light of its track record so far, the reception from investors will likely be more enthusiastic.