Type: 425
Sequence: 1
Description: Rule 425 Communications
Filed by 24/7 Media, Inc.
Pursuant to Rule 425 under the Securities
Act of 1933
Commission File Number 0-29768
Subject Company: 24/7 Media, Inc.
Meg Brossy Corey Olfert Sandra Laws
24/7 Media Fleishman-Hillard LawsComm Public
212-231-7104 213-489-8253 Relations
[email protected] [email protected] 303-755-4400
[email protected]
24/7/EXACTIS CONFERENCE CALL SCRIPT
JOEL HERSKOVITS:
Good morning and thank you for joining us today for our conference call to
announce an exciting strategic acquisition by 24/7 Media. I'm Joel Herskovits,
Director of Investor Relations for 24/7 Media, and I'm here with David Moore,
our CEO, Andy Johns, our CFO, and Tom Detmer, CEO of Exactis.com.
You should have received or be in the process of receiving today's release. If
you need a copy of the release, please call us at 212-231-7100.
Dave will lead off the call today with an overview of the transaction and a
discussion of how Exactis fits into 24/7's overall strategic picture. Tom will
then give his perspective on the position of the combined business in the
email space. Andy will give you some numbers of what this combined business
looks like. And finally, we will leave time at the end of the call to address
any questions.
I would like to ask you to please keep in mind that during the course of the
conference call we will be providing some forward-looking statements that are
subject to risk factors and uncertainties. I urge you to review our 10-K and
10-Q's to review the cautionary statements and risk factors contained therein.
With that, I'll turn it over to our CEO, David Moore ... Dave?
DAVID MOORE:
Thanks Joel.
Good morning, everyone, and thank you for joining us today. The acquisition of
Exactis catapults us into a clear leadership position as the preeminent global
provider for customer acquisition and customer relationship management. This
is a space where, until today, no player has
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established true leadership. This acquisition places us in a commanding
position to help our clients to both acquire and retain customers like never
before.
24/7 Media announced earlier today that we entered into a definitive agreement
to acquire Exactis.com through a stock-for-stock transaction. Upon closing, we
will exchange .6 of a share of 24/7 Media common stock for each outstanding
share of Exactis common stock. The total transaction value based on
yesterday's closing price is nearly $500 million.
24/7 Media has been moving relentlessly during the past two years toward our
goal of becoming the preeminent global provider of interactive marketing
solutions and services. We have already built the largest global ad network
and the largest fully permissioned opt-in email database. We are currently
rolling out our next generation ad serving solution, 24/7 Connect. Through
recent strategic acquisitions, we have further expanded into third party ad
serving solutions, loyalty programs, and technology solutions to ensure that
we are at the forefront of content delivery in other new mediums such as
wireless and broadband. We have always had the best sales force in this
industry, and through these recent strategic initiatives we have also built
the deepest and most talented technology team in the e-marketing solutions
business.
Now, with the acquisition of Exactis, I am delighted to report that we have
taken a major step in rounding out our full range of global customer
relationship management solutions. We believe that this acquisition will also
help us to unlock the inherent value in our company by demonstrating our
leadership in a new space which only we command.
Exactis.com is the largest provider of permission-based precision e-mail
marketing and communications outsourcing solutions for category leaders in
e-commerce, media and financial services. Exactis has been in business since
1996, during which time it has built by far the most robust e-mail engine in
the industry. In fact, Exactis delivered over 650 million e-mail messages in
the fourth quarter of 1999 and has more than 100 corporate clients. This
technology capacity is already more than twice as big as anyone other in the
industry, and the company will further expand that capacity by the end of
March 2000 when it expects to have capacity to deliver over 50 million
messages per day, or 1 1/2 billion per month.
And now, with the development of Exactis' proprietary TargetMessaging product,
it has the leading suite of customized e-mail communications solutions.
Exactis works with corporate clients to distribute news and information,
deliver event-triggered communications, and target and manage large-scale
one-to-one e-mail marketing campaigns for both retention and acquisition. Its
success can be measured by its rapidly expanding blue- chip roster of clients,
which includes such high-quality names as Tribune, American Express, The
Economist, Sony, Charles Schwab, MSNBC, the Industry Standard and the Red
Herring, to name just a few.
To give you an idea of what this combination means for our combined client
base, let me review for you where it puts us today. We have two core groups of
assets - our databases and our technologies - which have been developed and
are being supported by a team of over 250 leading engineers and developers.
Our email database is the largest in the industry, with more than 20 million
opt-in email addresses under management. And we will now be using our leading
sales organization to deliver a broad suite of CRM products and services, for
both customer acquisition and retention.
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As I just mentioned, our technology staff now totals over 250 engineers and
developers. Prior to this transaction, we had seized technology leadership of
the global ad serving market, and we can now say that our technology team is
the strongest one across all platforms. The combined forces afford 24/7 Media
additional breadth and capacity worldwide.
With that, I'd like to turn this over to Tom Detmer for his thoughts. Tom?
TOM DETMER:
Thank you, Dave.
Good morning everyone.
I am extremely excited to be on this call today with Dave and Andy, as we
announce this transaction to bring together our leading technology
capabilities across the e-mail space with 24/7's strength in Internet and
e-mail marketing and technology capabilities.
In the past year, I have watched 24/7 Mail as it has grown from a near-
start-up operation to its position today. With a database of more than 20
million opt-in e-mail names, 24/7 Mail has quickly established itself as the
clear industry leader of permission-based e-mail addresses which can be
utilized for customer acquisition. It's done a fantastic job in building a
deep, rich database of names, and we are extremely excited about tying
ourselves to the largest and best permission-based opt-in e-mail provider
available.
As Dave alluded to earlier, the Exactis business evolved out of the customer
relationship management side of the emarketing business. Our core strength has
been in developing the industry-leading technology platform from which we
deliver email solutions, as well as recently adding targeted services for
one-to-one e-mail marketing through our TargetMessaging solution.
We have actually worked with 24/7 over the past few months recently in
developing our new ProspectMessaging service, which brokers permission- based,
opt-in email names owned by 24/7 and others. So, before we even formalized our
relationship, we have had an opportunity to work with and know each other
well.
Now, as part of the 24/7 Media family, no one else will be able to match our
strength of deploying a large-scale, fully integrated Internet marketing
solution. We are truly able to offer the only end-to-end solution - both ad
serving and email - customer acquisition and retention. It's really what our
clients say they ultimately want.
Finally, when our technologists got together with their technologists, our
staff was very impressed. Their management is very strong and experienced.
Their architecture for 24/7 Connect is excellent. And it appears that our
hardware and software configurations will fold together very easily. Our staff
thought 24/7 Connect was very user friendly, will scale well, and will
ultimately become the new global standard in ad serving.
With that, let me turn it over to Andy, who will briefly run through some of
the exciting metrics that we see by putting our businesses together.
ANDY:
Thanks, Tom.
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Before I get into some of the metrics that will be achieved by the combined
company, let me lay out a few facts about the deal.
First of all, as Dave said, the definitive agreement has been signed. While
this is subject to shareholder approvals, we have already locked up a majority
of the Exactis shares. A significant minority of 24/7's shareholders,
including all those shares represented on our Board, have committed their
votes in favor of this deal as well. The deal is expected to close in 3-4
months, depending on SEC timing.
Based on 24/7's closing price last night, the deal was priced at a 38% premium
over Exactis's 30-day average stock price. We believe this compares favorably
with other recent deals in this sector, particularly since their stock price
did not experience a big run-up prior to announcement.
We will be issuing a total of approximately 7.6 million shares of our stock
for their current shares outstanding. In addition, we will be assuming options
and warrants equal to another 2.3 million of our shares on a fully- diluted
basis.
The deal is structured utilizing purchase accounting treatment, resulting in
significant goodwill on our balance sheet, which we expect to amortize over
the next 4 years.
When we look at the impact of the Exactis operation as part of 24/7, it is
very clear that we will reap many benefits.
First off, based on the Street consensus for Exactis, it is clear that, pro
forma for all of 2000, they would be adding at least $20 million to our
revenue. We are extremely comfortable with this number. In fact, I can tell
you now that the combined business, on a pro forma basis, should generate an
absolute minimum of $10 million during the first quarter of 2000 alone.
In terms of gross profit, Exactis's business model is extremely favorable.
Their gross margin has been running in the 84% range and is expected to remain
there. Therefore, as their business is folded in, our overall gross margin
target for the combined business will increase by at least 5 percentage
points. As we drive a higher proportion of our overall business into higher
margin business lines including this, that number may increase even more.
For operating costs, we believe that there are some meaningful synergies to be
enjoyed. In particular, Exactis has already developed many of the technology
capabilities that were envisioned for development to benefit 24/7 Mail during
the coming 12 months. We will be able to immediately employ those
technologies, and we will save on the costs of development. In addition,
Exactis was launching into a major expansion of its sales efforts during the
coming 12 months. We expect to enjoy some meaningful leverage off of 24/7's
industry-leading sales force.
On an EPS basis, therefore, prior to goodwill and deal-related charges, this
deal is accretive for 24/7. We expect that the inclusion of Exactis in with
24/7 will result in an improvement in EPS, on a pro forma full year basis for
2000, of at least 3 cents per share. In addition, while we had generally
guided the Street to expect 24/7 to achieve cash breakeven in its operations
by mid-2002, this acquisition should help to accelerate that timetable
slightly.
At this point, I'd like to mention, for those of you that don't already know,
that 24/7 Media has planned an Analyst Day for Friday afternoon, March 10th,
at which we will present to the Street all of the positive
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events that have been happening within the company. At that time, we will be
prepared to present new guidance for combined financial projections,
incorporating not only anticipated results of operations including Exactis but
also the anticipated results for our other recent acquisitions: Imake, Sabela
and AwardTrack.
With that, I'd like to turn it back to Dave Moore. Dave?
DAVE MOORE:
Thank you, Andy. This concludes our formal remarks. I'll turn the call back
over to the conference administrator, who will instruct you how to enter the
queue for questions.
[Q & A is conducted. Then the conference administrator turns the call back
over to David Moore]
DAVE MOORE:
Once again, thank you very much for taking the time today to participate in
this conference call. I'd like to close by reiterating how excited we are
about the prospects for 24/7, and how glad we are that Exactis is about to
become part of our family. If you have any further questions, please don't
hesitate to contact us personally. Thank you, and we look forward to reporting
continued exciting growth in the future.
Caution Concerning Forward-Looking Statements
This document includes certain "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. These statements are
based on management's current expectations and are naturally subject to
uncertainty and changes in circumstances. Actual results may vary materially
from the expectations contained herein due to changes in economic, business,
competitive and/or regulatory factors. More detailed information about those
factors is set forth in the most recent quarterly report and other filings
with the Securities and Exchange Commission made by the companies named
herein. In addition, the following factors, among others, could cause actual
results to differ materially from those described herein: failure to obtain
stockholder approval for the merger, the risk that the 24/7 Media and the
Exactis.com businesses will not be integrated successfully, the potential for
impairment of relationships with employees or customers, the costs related to
the merger, the inability of the companies to realize synergies or other
anticipated benefits of the merger, and other economic, business, competitive
and/or regulatory factors affecting the businesses of 24/7 Media and
Exactis.com. None of the companies named herein are under any obligation to
(and expressly disclaim any such obligation to) update or alter their
forward-looking statements whether as a result of new information, future
events or otherwise.
---
Investors and security holders are urged to read the definitive joint proxy
statement/prospectus regarding the merger referenced in the foregoing
information when it becomes available, because it will contain important
information. The joint proxy statement/prospectus will be filed with the
Securities and Exchange Commission by 24/7 Media and Exactis.com. Investors
and security holders may obtain a free copy of the joint proxy
statement/prospectus (when it is available) and other documents filed by 24/7
Media and Exactis.com with the Commission at the Commission's web site at
www.sec.gov. The joint proxy statement/prospectus and these other documents
may also be obtained for free from 24/7 Media by directing a request to
[email protected] or by calling (212) 231-7100.
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