After more than a decade as a public company, Vertrue (NASDAQ:VTRU) is throwing in the towel. It's selling out to private equity firms One Equity Partners, Oak Investment Partners, and Rho Ventures for $48.50 per share. Since mid-January, the stock has rallied 36%, but don't expect much more upside.
Vertrue started out designing traditional membership programs for companies like Citigroup (NYSE:C). Over the past few years, acquisitions helped the company push aggressively into online marketing. Its deals have included the personals site Lavalife, bargain.com, and even a referral service for cosmetic surgeons.
All this dealmaking has boosted revenues. From fiscal years 2003 to 2006, revenues increased 44% to $658.9 million, while net income grew 36% to $32.7 million.
Despite all the dealmaking, Vertrue gets nearly 80% of its revenues from its membership business, which grew 6% in the fiscal second quarter.
The personals business is also facing headwinds from the likes of IAC/InterActiveCorp's (NASDAQ:IACI) Match.com and Yahoo! (NASDAQ:YHOO). At Vertrue, this segment boosted fiscal Q2 revenues by 28%, but that was primarily due to its acquisition of Mobile Lifestyles.
The proposed buyout deal does include a "go shop" provision, meaning Vertrue can still seek out strategic bidders. Might there be a higher bid? I think the chances of such a hookup are slim. The deadline for the provision is April 16, leaving little time to negotiate another deal.
At seven times EBITDA (earnings before interest, taxes, depreciation, and amortization), the deal's valuation is also reasonable. In the recent $1.7 billion buyout of Catalina Marketing (NYSE:POS), the multiple was nine times EBITDA.
As in many going-private transactions, shareholders may seek to block the deal with litigation. That could add a buck or so per share to the final price tag, but it's really not enough to jump into the stock right now.
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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 1,590 out of 24,619 in CAPS. The Fool has a disclosure policy.
