IAC/InterActiveCorp is acquiring Cornerstone Brands from a group of private investors, including principal shareholders Madison Dearborn Partners and JP Morgan Partners.
The transaction value is $720 million net of expected tax benefits.
The company will join IAC’s Electronic Retailing unit and HSN. HSN Catalog Services, consisting of Improvements and Alsto’s, will become part of Cornerstone Brands. This will provide HSN Catalog services with access to Cornerstone’s state-of-the-art centralized platform and allow the companies to share in significant cross-promotional benefits.
Thomas J. McInerney, EVP and CFO of IAC and CEO of IAC Electronic Retailing, said, “This arrangement enables us to immediately and significantly increase our position as one of the world’s leading interactive retailers by expanding our presence across the multiple channels of catalog, TV, and online. Catalog shoppers have been the fastest retail shoppers to migrate online and aligning the promotional power of TV and the catalog, together with the convenience and dynamic experience of the Internet, will provide compelling shopping experiences for current and new customers. Internet retailing is a substantial and expanding part of the overall retail landscape, and with this acquisition we are well positioned to capitalize on this trend. We expect this transaction to be accretive to our earnings, and to drive continued organic growth, and provide a platform for add-on investments.”
The Cornerstone Brands portfolio includes the catalogs and websites of Frontgate, Ballard Designs, Garnet Hill, Smith and Noble, The Territory Ahead and TravelSmith. The company reported revenues, EBITDA, and Operating Income Before Amortization of $720 million, $66 million and $59 million, respectively, for the fiscal year ended January 29, 2005.
Cornerstone is an industry leader in direct marketing and multi-channel merchandising, with more than 2 million active customers. Cornerstone’s distinctly unique, proprietary and exclusive product line (65% of sales revenue) enables the Company to continuously outpace the category, with top- line growth averaging more than 19% per year for the past 2 years.
Marty Nealon, President of HSN U.S., said, “HSN’s mission is to provide great products and compelling shopping experiences to its customers. The individual brands of the Cornerstone group are leaders in their categories, and they will add tremendous breadth and variety to our on-air and online programming. We will seek to develop meaningful ties between the HSN and Cornerstone brands and consumer bases, share our significant Internet experience to further Cornerstone’s online presence, and leverage operating efficiencies. We are excited to welcome the talented Cornerstone team to IAC and HSN.”
John Schaefer, currently President and COO of Cornerstone Brands, said, “All of us at Cornerstone are extremely excited to be joining IAC and particularly our new colleagues at HSN. We see this event as a testament to the hard work of everyone at Cornerstone, in that it resulted in the interest and eventual acquisition of our company by one of the leading e-commerce enterprises in the world. Individually and collectively our brands are positioned for continued growth, and our access to the TV retailing and interactive expertise of HSN and IAC will elevate our natural course, especially online.”
The transaction is expected to close during the second quarter of 2005.
Murdok | Breaking eBusiness News
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