RetailMeNot (SALE) is trading sharply higher today (+49%) after announcing after the close last night that it has agreed to be acquired by Harland Clarke. It was a nice premium at $11.60/sh in cash, which computes as a 50% premium.
In case you're not familiar, SALE is the operator of what it says is the world's largest online coupon marketplace for shopping and dining. The company enables consumers to find hundreds of thousands of digital offers to save money while they shop or dine out. In 2016, RetailMeNot had over 650 mln visits to its websites and its mobile presence is growing with 23.1 mln mobile unique visitors per month during 4Q16. SALE's portfolio of websites and mobile apps includes RetailMeNot.com in the US; RetailMeNot.ca in Canada; VoucherCodes.co.uk in the UK; ma-reduc.com and Poulpeo.com in France; and GiftCardZen.com and Deals2Buy.com in North America.
Harland Clarke is a provider of integrated payment and marketing services. Its major business units are Valassis (acquired in early 2014), Harland Clarke and Scantron. Harland Clarke is a subsidiary of MacAndrews & Forbes, a holding company wholly owned by billionaire investor Ron Perelman.
The rationale for the deal is to combine Valassis' large quantity of offers from its large client base with RetailMeNot's digital audience distribution and brand. The combined companies will create an omni-channel media network with tens of thousands of advertisers reaching hundreds of millions of consumers around the world. The transaction, which has been unanimously approved by RetailMeNot's Board of Directors, has an equity value of approximately $630 mln.
The idea is that RetailMeNot provides a new digital channel to distribute Valassis' clients' offers. It complements Valassis' current digital, mobile, mail and other print networks. RetailMeNot's capabilities span multiple platforms and channels including web, mobile and app, delivering online coupons and sales, discounted gift cards, and cash back offers, along with food, dining and travel offers. The addition of RetailMeNot brings Valassis' clients a new, vast and active consumer base explicitly seeking deals, offers and savings.
In sum, SALE has seen its share price trend mostly lower since its IPO in mid-2013 on a series of poor quarters and guide-downs. The deal seems to make sense as SALE has a strong online distribution channel which will be a nice outlet for Valassis' clients' advertising offers. Harland Clarke acquired Valassis in early 2014 for $1.84 bln and this deal is valued at $630 mln.
On a final note, a 50% premium was nice to see for SALE investors. It will also provide some hope for a takeout for some other beaten down internet names generally, not just in this space. Probably the closest plays are Quotient Tech (QUOT), formerly known as Coupons.com, and Ominto (OMNT), a pioneer of online cash back programs. Another name to watch is Groupon (GRPN).