7/2/01 - [GENI] Bloomberg: Icahn Gets $74 Mln Package From GenesisIntermedia (Update2)
Icahn Gets $74 Mln Package From GenesisIntermedia (Update2)
By David Evans
Van Nuys, California, July 3 (Bloomberg) -- Financier Carl Icahn will be paid $275,000 by money-losing telemarketing company GenesisIntermedia Inc. to help it raise cash for acquisitions, the first piece of a compensation package worth more than $74 million at current prices, regulatory filings say.
GenesisIntermedia, whose biggest outside shareholder is financier and arms merchant Adnan Khashoggi, last week said it received a ``conditional commitment'' from Icahn for a $100 million line of credit. His obligation remains ``conditional,'' said yesterday's 8-K filing with the Securities and Exchange Commission. Icahn must approve terms of any loan.
``I only really make money here if the company makes it,'' said Icahn in a telephone interview. ``I've got to spend a fair amount of time to make these acquisitions happen.''
He said there could be a number of compatible business links between Genesis and Lowestfare.com, his Internet travel services company.
Genesis will pay Icahn $275,000 immediately and an additional $900,000 after the company receives a loan, the filing said. Under a two-year consulting contract, Icahn's Riverdale LLC also received the right to purchase 5.5 million shares of Genesis at a 73 percent discount from yesterday's closing price of $18.60. The options, with an average strike price of $5.09 per share, represent a 20 percent stake in Genesis, the company said.
If exercised now, the options would give Icahn a paper profit of $74 million -- 5.5 million shares times the $13.51 difference between the strike price and the market value of the shares. Genesis shares fell 10 cents to $18.50.
Icahn, Genesis Chief Executive Ramy El-Batrawi and Khashoggi agreed not to sell their Genesis shares for one year, subject to certain conditions.
``Nobody's going to buy my stock a year from now if the company hasn't made it,'' said Icahn.
A spokesman for GenesisIntermedia, Robert Bleckman, didn't return calls.
Details
GenesisIntermedia gave Icahn 4 million options with an average strike price of $6 per share. El-Batrawi gave Icahn another 1.5 million options to buy Genesis at $2.67 a share.
Riverdale may choose to convert the 4 million warrants issued directly from Genesis into 2.7 million shares, worth about $50 million, without putting up any cash, according to the filing yesterday.
Any loan to Genesis would give Icahn ``sole discretion'' to determine the adequacy of collateral for any loan, according to the filing.
``We're looking at certain possible acquisitions'' to finance, said Icahn.
The Van Nuys, California-based company lost $33.5 million in 2000, on sales of $42.3 million. Genesis lost $7.9 million in the first quarter of 2001, on sales of $12.5 million. Genesis, which has a market value of about $380 million, had a negative net worth of $15 million as of March 31.
Genesis had already borrowed $38 million from Khashoggi under an existing line of credit, as of May 17, according to the company's proxy statement.
Buy Recommendations
Most of Genesis' revenue comes from telemarketing and infomercials for products, including ``Ab Twister'' exercise machines and tapes with advice on love and personal finance. It also operates Internet kiosks in more than 30 shopping malls.
On May 11, Bloomberg reported that Genesis gave shares now worth more than $3 million, to money manager Courtney Smith, who helped send the stock soaring after he recommended it 18 times on CNN, CNBC and Bloomberg Television.
Genesis disclosed the payment of 216,000 shares more than a year after Genesis purchased and closed a Web site developed by Smith. The shares were routed to Smith, through a vitamin exporting company owned by a friend of Smith.
The disclosure of the payment in an annual report with the SEC makes no mention of Smith, a TV stock picker who became one of Genesis' largest outside stockholders when he received the shares in exchange for a Web site he owned. His stake is now worth about $3.9 million.
Genesis shares soared 24 percent on May 9 following a buy recommendation from Rafi Khan, an ex-Los Angeles stockbroker banned from the securities industry for stock manipulation and now on probation after a felony conviction for income tax evasion.
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