I've been out of town for 2 weeks, and I've just returned. I haven't had a chance to review the 10-K yet. But I have seen all the other releases, including the Q4 report. It's not very promising. Let's hope CUC is watching. I think the case for CUC is even greater now that HFS (merger partner) has cancelled its possible acquisition of Montgomery Ward's Signature Group business. The following article from WSJ suggests King World as one of the possible suitors. IMO, King World's interest in NM lies exclusively in the media-buying contracts and international television exposure. That seems limited compared with the numerous benefits that CUC would gain. Even a merger with Guthy-Renker/News Corp. would not provide as many synergies as the combination of CUC and NM.
I'll post my comments on the 10-K when I finish reviewing it. Here's the article:
Advertising:
Leading Player
In Infomercials
Talks to Suitors
----
By Lisa Brownlee
Staff Reporter of The Wall Street Journal
Infomercial bulletin: National Media, the nation's biggest publicly traded
infomercial company, may be up for grabs.
People in the industry say the Philadelphia-based company has been talking
with possible acquirers after a loss-producing expansion spree. In an interview
yesterday, National Media said it has recently cut 19% of its 455 employees,
or about 85 people, mostly at an acquired subsidiary.
National Media insists it isn't putting itself on the block, but it does
acknowledge recent talks with several parties about "strategic alternatives."
According to others in the industry, at least two possible acquirers or merger
partners have been circling the company of late. A person familiar with the
situation says one of the two, King World Productions of New York, which
distributes "Oprah Winfrey," "Jeopardy!" and "Wheel of Fortune," isn't
pursuing a deal right now.
That leaves National Media still talking with closely held Guthy-Renker of
Palm Desert, Calif., a similar-size infomercial concern that might benefit from
National Media's strong foreign presence.
How could the company that brought you the Flying Lure and the Regal Ware
Royal Diamond line of nonstick pots and pans wind up hard-pressed in an
industry that commonly marks up a product to about five times the cost before
selling it? The company's stock has plunged by two-thirds from the past year's
peak of $17.125. In composite trading on the New York Stock Exchange
yesterday, National Media shares closed at $5.1875, down 25 cents.
Analysts say National Media wound up with too much money committed to air
time and too few tempting products to fill it. No big-deal products came along
to replace the company's sensation of last year, the Ab Roller Plus, a $100
million-a-year phenomenon at its peak. The Great North American Slimdown
with Larry North weight-loss program is one of National Media's most
successful shows of late. But the company hasn't turned such products as its
MicroWise cookware or its E-Force aerobic rider into U.S. sensations.
The big challenge with infomercials is to keep breaking new ground with hit
products -- and that is getting harder to do. A deal could combine
Guthy-Renker -- which bills itself as the nation's biggest buyer of paid
programming because it spends some $100 million a year on U.S. air time --
with a leading player in infomercials abroad. National Media says its paid
programming reaches about 370 million television households in 70 countries
from Belarus to South Africa.
It isn't clear how any deal might be valued. The company said yesterday: "As
we have stated previously, Lehman Brothers has been hired to examine a
variety of strategic alternatives for the company, and we have had preliminary
discussion with several interested parties. It would be improper to be more
specific."
National Media has some unique problems, industry veterans say. "We're
making money. Guthy-Renker's making money," says Peter Spiegel,
co-founder of Kent & Spiegel Direct, a Culver City, Calif., infomercial
company. Late yesterday, National Media posted a net loss for the fiscal
fourth quarter, ended March 31, of $49.3 million, or $2.08 a share, compared
with year-earlier profit of $5.9 million, or 24 cents a share. The full-year loss,
previously flagged by the company, was $45.7 million, or $2.07 a share.
National Media said last month that it was in technical violation of loan
accords and said that the opinion from auditor Ernst & Young would question
whether it could remain a "going concern."
"They owned a lot of media time, but they didn't have products to ship," says
George Sutton, an industry analyst at Rauscher Pierce Refsnes in Dallas. TV
time is one of the biggest drains on the infomercial industry's wallet, totaling
about $650 million a year in the U.S., according to Williams Worldwide, an
infomercial ad agency in Santa Monica, Calif. National Media's media
spending represented about 30% of its $292.6 million in revenue in fiscal
1996; the figure grew to an estimated 36% of the latest year's revenue of
$358.2 million.
"Onerous media costs hampered our ability to produce profitable shows for
the U.S. market," the company said yesterday. But it added: "We reduced
long-term cable contracts in the U.S. in favor of short-term broadcast
contracts and are pleased with initial results."
About six weeks ago, a person close to the situation says, an initial dinner
meeting was held in Phoenix with guests including Greg Renker and Bill Guthy,
cofounders of Guthy-Renker, which is 37.5%-controlled by Rupert
Murdoch's News Corp.; turnaround artist Robert Verratti, National Media's
president and chief executive for less than three months; Constantinos "Gus"
Costalas, National Media's vice chairman; and Frederick Hammer, National
Media's chairman.
Guthy-Renker confirmed the dinner.
National Media has struggled to find another star product on the order of the
Ab Roller Plus, which encountered patent-infringement litigation and isn't sold
any longer by the company in the U.S. The company said that "certain
settlement and legal costs have been reserved" and were reflected in the losses
posted yesterday.
The toll taken by aggressive expansion is clear. Last year, the company paid
$26 million in stock for Positive Response Television, an infomercial
production house that churns out "Amazing Discoveries" shows starring
pitchman Mike Levey. National Media says the latest full-year deficit includes
a "significant loss" for the acquired concern, whose staff has been cut 90%.
Looking ahead, the company said: "While we have not completed our
restructuring, there is no plan that would likely cause significant loss of
employment." |
