Canada-based media company Kaboose Inc. (KAB.TO) on Wednesday reported a net loss for the fourth quarter compared to a profit in the year-ago quarter, hurt by a non-cash charge related to write-downs of goodwill and long-lived assets. The company also said it entered into two separate deals to sell substantially all of its assets for C$120 million. Kaboose will sell its UK business to Barclays Private Equity Ltd. for C$97 million and its North American operations to Disney Online for C$23.3 million. Following the completion of these two transactions, Kaboose intends to distribute the resulting net proceeds to its shareholders.
Fourth Quarter Results
For the fourth quarter, the Toronto-based company reported a net loss of C$65.09 million, or C$0.46 per share, compared to net income of C$1.73 million, or C$0.02 per share, in the same period last year.
The latest quarter's results include a non-cash impairment charge of C$65.54 million, comprised of write-downs to goodwill of C$60.32 million and write-downs to long-lived assets of C$5.22 million, respectively. The results for the latest quarter also include amortization related to previous acquisitions of C$4.05 million, compared to amortization of C$2.00 million in the prior-year quarter.
Kaboose said that during the quarter, it conducted a review of its goodwill and long-lived assets for potential impairment due to a material decline in its market capitalization.
Revenue for the latest quarter rose 80% to C$21.52 million from C$11.97 million in the same quarter last year.
Jason DeZwirek, Chairman and Chief Executive Officer of Kaboose said, "Amidst a weak global economy and turbulent capital markets, the decline in our market capitalization required that during the fourth quarter, in accordance with accounting standards, we recognize a non-cash charge related to the impairment of goodwill and long-lived assets."
The results for the fourth quarter and fiscal year 2008 include the first full year of contribution from Bounty Group Ltd., the U.K.'s largest parenting club and family destination online, which Kaboose acquired in November 2007.
Fiscal Year 2008 For fiscal year 2008, Kaboose's net loss was C$74.36 million, or C$0.53 per share, compared to net income of C$1.70 million, or C$0.02 per share, in the previous year.
The net loss for the year includes a non-cash impairment charge of C$65.54 million and amortization related to previous acquisitions of C$14.98 million. The prior-year's results include amortization of C$4.83 million. Revenue for the year more than doubled to C$81.94 million from C$33.63 million in the prior year.
Sale of assets
Kaboose produces websites and other online content for families and operates Kaboose.com, BabyZone.com, ParentZone.com and AmazingMoms.com.
Kaboose said that it entered into two separate agreements to sell substantially all of its assets for C$120 million. Following the completion of these two transactions, Kaboose intends on distributing the resulting net proceeds to its shareholders.
The two agreements will effect the sale of the Bounty Group to a company controlled by funds managed by Barclays Private Equity Limited, or BPE, and the sale of the company's North American business to Disney Online, a unit of Disney Interactive Media Group segment of The Walt Disney Company (DIS).
Kaboose expects that net proceeds of approximately C$0.65 per share to be distributed to shareholders in the months following completion of the transactions, which represents a premium of approximately 70% to the thirty-day average closing price of the company's stock on the Toronto Stock Exchange.
CEO DeZwirek said, "With the fundamental shift in the sentiment of the capital markets in general and in the media and advertising sectors in particular, and having been approached by several large international media companies and global private equity institutions interested in our business, we felt compelled to re-examine our long-term plan."
DeZwirek added, "With the advice of our financial advisors, the company's board of directors determined that Kaboose could divest its assets and realize significantly greater value than we could deliver as an independent public media company in the foreseeable future."
Kaboose entered into an agreement dated March 31, 2009 with BPE, pursuant to which it has agreed to sell all of the issued and outstanding share capital of its UK subsidiary through which it owns Bounty Group. The purchase price is GBP 54 million, or about C$97 million in cash, less third-party debt outstanding on closing, which is expected to be approximately GBP 10 million, or approximately C$18 million. The company noted that the closing of the Bounty Transaction is conditional on obtaining shareholders' approval and other customary conditions.
The deal provides for a non-solicit covenant by Kaboose that entitles the company to consider and accept a superior proposal relating to Bounty or all of the assets or share capital of Kaboose, and also provides for a termination payment of GBP 0.9 million to be paid by Kaboose to BPE if the deal is not completed as a result of a superior proposal.
Kaboose also entered into a deal dated March 31, 2009 with Disney Online, a unit of Disney Interactive Media Group segment, pursuant to which it has agreed to sell substantially all of its North American assets, including all of its online media properties and related businesses.
The purchase price payable for the deal is C$23.3 million, subject to a working capital adjustment. The closing of the transaction is conditional on the closing of the Bounty deal and obtaining shareholders' approval, among others.
The deal provides for a non-solicitation covenant by Kaboose that entitles the company to consider and accept a superior proposal for a purchase of its North American assets or all of the assets or share capital of Kaboose and a right in favor of Disney Online to match any superior offer. Kaboose is required to pay a termination fee of CC$0.47 million if the deal is not completed as a result of a superior proposal.
Kaboose said that its shareholders will be asked to approve both the transactions at an annual and special meeting of shareholders, expected to occur in May 2009.
Each of these two transactions was entered into following a sales process undertaken by Kaboose and supervised by its board of directors with the assistance of the company's financial advisors, Allen & Company LLC and GMP Securities L.P.
As part of this sales process, Kaboose entertained proposals from several potential purchases of the company as a whole, and of the UK business and the North American business separately.
The company's board of directors has unanimously recommended that shareholders vote in favour of each of the transactions at the meeting. Shareholders will vote on each transaction separately and each vote will require the approval of two-thirds of the company's shareholders present in person or by proxy. Both the transactions are expected to close within approximately 60 days.
CEO DeZwirek has agreed with BPE to vote the shares controlled by him in favour of the transaction for Bounty and each of the directors and senior officers of Kaboose, including DeZwirek, have indicated to the company that they intend on voting all their shares owned or controlled in favour of the deal with Disney.
Separately, Disney Online said in its statement that it has agreed to acquire Internet assets from Kaboose for about USC$18.4 million, or CC$23.3 million. The assets include Kaboose.com, Babyzone.com, AmazingMoms.com, Funschool.com and Zeeks.com. These will be integrated into Disney Online's line-up of web sites, extending its leadership in the kids and family online space. Stock Quotes
In Wednesday's regular trading on the Toronto Stock Exchange, KAB.TO is trading at C$0.57, up C$0.14 or 32.56% on a volume of 8.62 million shares. The stock has been trading in a range of C$0.23-C$1.56 in the past 52 weeks.
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