Website Pros and Web.com Agree to Merge
Website Pros, Inc. and Web.com, Inc. have signed a definitive merger agreement, creating a market leader in the small and medium-sized business (SMB) web services industry with annualized revenue of over $117 million and over 234,000 paid subscribers.
Under the terms of the agreement, which was unanimously approved by the boards of directors of both companies, Web.com shareholders may elect to receive for every Web.com share either 0.6875 shares of Website Pros stock or $6.5233 in cash, subject to proration so that the total cash paid shall equal $25 million. In the aggregate, Website Pros will issue approximately 9 million shares of Website Pros stock and pay $25 million in cash. In addition, Website Pros will assume all of the outstanding options to purchase common stock of Web.com at an exchange rate consistent with the value offered to holders of Web.com common stock. Based on the closing price of Website Pros' stock on June 26, 2007, the transaction is valued at an aggregate purchase price of approximately $129 million.
The merger, which is subject to regulatory reviews and approvals, approval by the shareholders of both companies and certain other customary conditions, is expected to close during the second half of 2007.
"The combination of Website Pros and Web.com represents a milestone event in the highly fragmented web services market for small and medium-sized businesses, and is an investment in growth and scale that expands the customer base and value proposition for both companies," stated David Brown, President and CEO of Website Pros. "Web.com is highly synergistic with Website Pros from a product and services offering, market focus, and distribution channel perspective. Website Pros' Do-It-For-Me web services, outbound sales and proven lead generation partners coupled with Web.com's Do-It-Yourself web services, online marketing expertise, and complementary channel of SMB-focused partners make for a formidable player in the industry. The SMB market is very large with over 25 million SMBs in the U.S. alone, and I am excited to work with Jeff Stibel and his excellent team ensuring that our combined organization capitalizes on this tremendous opportunity."
"We are very pleased that our success since new management took over in August 2005 has led to an approximate 200% increase in shareholder value and has positioned Web.com to realize further value through a merger with Website Pros," stated Jeff Stibel, President and CEO, Web.com. "Over the last two years, the company has restored and accelerated top line growth, generated record levels of subscriber growth and has significantly improved its operational and financial performance. This complementary merger is a logical next step that has the potential to create substantial value for customers, partners and shareholders of both Web.com and Website Pros."
There are a number of strategic reasons supporting the merger, including the following:
Creates a website and web services market leader -- The combination of Website Pros and Web.com creates a single company with:
- Over $117 million annualized revenue run rate*
- Over 234,000 paying subscribers*
- 21 patents with several pending
- Industry-leading partnerships
*as of March 31, 2007
Comprehensive web services for SMBs -- Website Pros is the leading provider of Do-It-For-Me web services solutions, while Web.com is a leader in providing Do-It-Yourself web services. The combined company will be positioned to meet the diverse set of needs across small business customers and partners alike, thereby significantly expanding the addressable market opportunity for each individual company.
Significant cross-selling opportunity -- Website Pros has continued to expand its SMB solutions beyond web services, including offerings from Leads.com, RenovationExperts.com, 1ShoppingCart and Submitawebsite. In addition, Web.com has expanded its capabilities with the introduction of services such as Microsoft Exchange hosting and partner offers. With over 234,000 paid subscribers, there is a significant opportunity to cross-sell value-added solutions to each of the respective customer bases.
Highly complementary sales channels -- Website Pros' revenue growth has been driven by its outbound sales organization, which manages and pursues leads from its partner channel that includes brand name enterprise companies in the financial, printing and technology sectors that have a large base of SMB customers. Web.com has accelerated its revenue growth through execution of an efficient marketing strategy and growing partnerships with companies that also service the SMB market, including yellow pages providers. The complementary nature of the two companies' sales channels will enable the combined company to more effectively reach a far broader range of SMB customers than either company could do individually.
The companies believe there are significant opportunities for operating cost synergies through the integration of the two businesses, which is expected to result in pre-tax savings of approximately $5 million to $7 million during calendar year 2008. The merger is expected to be accretive to the combined companies' non-GAAP diluted earnings per share in its first full year (CY2008), and is expected to break even on a GAAP earnings per share basis by the fourth quarter 2008. In addition to benefiting from the growing momentum in Web.com's standalone business, the companies expect to capitalize on growth opportunities resulting from complementary products, channels, and geographic presence.
David Brown will continue in his role as Chairman and Chief Executive Officer of Website Pros. Jeff Stibel, the current President and Chief Executive Officer of Web.com, will become President of Website Pros, in addition to joining its Board of Directors. Including Mr. Stibel, Web.com representatives will hold two of seven seats on the combined company's Board of Directors.
Friedman, Billings, Ramsey & Co, Inc. acted as financial advisor and Cooley Godward Kronish LLP acted as legal advisor to Website Pros. RBC Capital Markets acted as financial advisor and Stubbs Alderton & Markiles, LLP acted as legal advisor to Web.com.
Website Pros and Web.com will host an investor conference call at 8:15 AM ET on Wednesday June 27, 2007 to discuss the announcement. The call can be accessed by dialing 800-811-8824 (U.S.) or 913-981-4903 (international). The replay number is 888-203-1112 (U.S.) or 719-457-0820 (international). The confirmation and replay number is 1284757. A live webcast of the call can be accessed on the investor relations section of the companies' website at http://ir.websitepros.com/events.cfm or www.web.com/ir.
About Website Pros
Website Pros (Nasdaq:WSPI) is a leading provider of Do-It-For-Me website building tools, Internet marketing, and lead generation solutions that enable businesses to maintain an effective Internet presence. The company offers a full range of Web services, including website design and publishing, Internet marketing and advertising, search engine optimization, customer support and technology, and lead generation, meeting the needs of a business anywhere along its lifecycle -- from those just establishing a Web presence to more sophisticated online e-commerce sites. For more information on the company, please visit www.websitepros.com or call at 1-800-GET-SITE.
About Web.com
Web.com, Inc. (Nasdaq:WWWW) is a leading destination for the simplest, yet most powerful solutions for websites and web services. Web.com offers do-it-yourself and professional website building, website hosting, ecommerce, web marketing, professional website design and e-mail. Since 1995, Web.com has been helping individuals and small businesses leverage the power of the Internet to build a web presence. More than 4 million websites have been built using Web.com's proprietary tools, services and patented technology. The company's web hosting and website building services can also be found under the Interland (www.interland.com) and Trellix (www.trellix.com) brands. For more information on the company, please visit www.web.com or call at 1-800-WEB-HOST.
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