CGI inks a deal for a potentially expensive acquisition:
CGI Holding Corporation Signs Letter of Intent to Acquire Babytobee.com, a Major Marketer to Expecting Parents
Thursday July 14, 9:28 am ET
Acquisition Will Continue to Position Think Partnership as a Leader in the Internet Marketing Space
NORTHBROOK, Ill.--(BUSINESS WIRE)--July 14, 2005--CGI Holding Corporation, which plans to seek shareholder approval to change its name to Think Partnership Inc. ("THK" or the "Company") (AMEX:THK - News), today announced that the Company has entered into a letter of intent to merge with privately held Morex Marketing Group, LLC, a New York limited liability company ("Morex") and the parent company of the Internet website www.Babytobee.com. Through Babytobee.com, Morex has developed an unusually successful model for direct marketing to expecting parents, primarily via the Internet.
According to Morex co-founder Lloyd Ecker, Babytobee.com is currently the largest gatherer of names of moms-to-be in the marketplace. He said the question, "Do you know a mother or father-to-be who wants a lot of free stuff for the coming baby?" is seen by over 10 million Internet users every day, and the response to that question has positioned Babytobee.com as a direct marketing leader in this niche market. Ecker said Babytobee.com has captured over 33 percent of the current pregnant population and expects to capture 50 percent in the next 12 months due to the proprietary postal, email and telephone permission-based parents-to-be database Morex has developed. As a result, Ecker explained, maternity and baby advertisers are eager to work with Morex to reach consumers making considerable purchase decisions on a wide variety of products and services.
In the merger, the Company plans to pay the shareholders of Morex six times Morex's pre-tax income for the 12 months ended June 30, 2005 payable half in cash and half in common stock of THK. Subject to the completion of audits, the company expects the pre-tax income of Morex for the 12 months ended June 30, 2005 to be between $1 million and $2 million and Morex expects its' 2006 pre-tax income to approach $5 million. The shareholders of Morex will also be entitled to certain earnout payments based upon the pre-tax earnings of Morex during 2005 through 2008 payable half in cash and half in common stock of THK. These potential earnout payments will ensure that the total merger consideration payable to the Morex shareholders will not be less than four times Morex's highest annual pre-tax income during that four year period, but not in any event more than $42 million.
Ecker and his partner, Robert Moore, the Co-Chief Executive Officers of Morex, will continue to lead the business after the closing. The closing of the proposed transaction is subject to the satisfaction of a number of conditions, including the completion of due diligence, the completion of audits, a financing contingency in regard to the cash portion of the merger consideration, the execution of mutually acceptable definitive documentation, board of director approvals, and other customary conditions.
Gerard M. Jacobs, the Company's CEO, stated, "Morex will be a tremendous addition to Think Partnership. Morex's growth over the past 18 months has been exceptionally rapid due to the uniquely successful model they've developed for reaching niche segments of the population via direct marketing over the Internet and by conventional direct mail. I'm looking forward to Lloyd Ecker and Robert Moore becoming our newest partners at Think Partnership."
Scott Mitchell, the CEO of the Company's Cherish subsidiary who led the negotiations on behalf of Think Partnership in this transaction, added, "Morex has developed a successful way to reach a particular niche, and we see them being able to use that model to expand exponentially into several other niche market segments when they join the Think Partnership family."
Ecker stated, "We really weren't looking to sell our company. But the next step in our business plan was to build the top prenatal and baby shopping and information Web site on the Internet. In order for us to do that, we knew we were going to need some additional expertise and that led us to Think's WebSourced."
Moore agreed. "WebSourced is going help us realize our goals to get to the top spots in all the search engines. The proposed merger with Think Partnership will also allow us to leverage their significant assets in affiliate marketing to create additional revenue streams. We're looking forward to becoming a significant contributor to THK's bottom line."
Josh Gillon, president of What If Holdings, LLC, initiated the transaction between the parties, and is representing Morex as its broker for the transaction.
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