Abstract Enterprises Corp -
Abstract details Auteo Media takeover
Abstract Enterprises Corp AEP
Shares issued 7,849,133 2000-03-30 close $1.95
Tuesday May 16 2000
Mr. Michael Kinley reports
Abstract Enterprises wishes to provide shareholders and investors with further information concerning the proposed transaction with Auteo Media Inc. (OTCBB:AUTM). In Stockwatch March 31, 2000, Abstract announced a proposed merger/reorganization by way of a statutory plan of arrangement pursuant to the Company Act (British Columbia), whereby Abstract shareholders would receive 1 Auteo Media share for each 4 Abstract shares as part of a takeover transaction. Closing would be expected to occur on or before June 30, 2000, at which time Abstract would delist from the Canadian Venture Exchange, and Abstract shareholders would own approximately 30 per cent of Auteo Media.
The following information concerning Auteo Media Inc. has been extracted from its recent news releases, which, along with additional information on Auteo Media, can be accessed through the Auteo Media Web site at www.auteo.com.
Auteo Media's business model empowers car dealerships and consumers by combining automotive data collection, digital photography, Internet marketing, point-of-purchase marketing and telecommunications through its various Web sites. Auteo Media helps remove the anxiety and uncertainty in marketing a car by providing consumers and car dealerships with knowledge on how to market their automobiles on the Internet and communicate through the buying experience.
Auteo Media has found that consumers and car dealerships want and need a simple-to-use and trusted link to help them locate the right service to showcase their products and needs. By using the Internet, Auteo Media is able to reinvent, simplify and improve the automotive marketing experience for everyone, and help customers and car dealerships communicate, share information, and make their decisions with confidence.
According to a recent J.D. Power & Associates survey, 26 per cent of used car buying consumers used the Internet when making a decision, up from 14 per cent in 1998. Furthermore, the National Automotive Dealers Association 1998 new-car sales totalled $367-billion annually; used cars sales from member dealers were $241-billion. "We are definitely in a burgeoning market. Our business model integrates automotive content, Internet exposure, e-commerce, electronic and wireless communications and customer management solutions," Auteo Media president Steve Van Leeuwen said.
Auteo Media is creating and managing diverse, yet interrelated, Internet-based solutions for the automotive industry and its consumers, and is at the forefront of the growing automotive e-commerce trend, capitalizing on the many opportunities the emerging new medium presents.
Recent Auteo Media developments
On Feb. 29, 2000, Flintrock Financial Services Inc. announced the acquisition of a majority interest in TYSA Corporation, and then on March 21, 2000, announced that the name of the company was changed to Auteo Media, Inc. By virtue of that acquisition, Auteo Media, Inc. currently owns 82.5 per cent of TYSA Corporation. Abstract owns 5 per cent of TYSA Corporation, and also holds an option to acquire an additional 12.5-per-cent interest in TYSA. By acquiring Abstract, Auteo Media will gain full control and ownership of TYSA Corporation.
Mr. Van Leeuwen stated: "It is important to our long-term success that Auteo Media gain full control of TYSA Corporation. TYSA Corporation is the largest point-of-purchase automotive marketing company on the West Coast, and brings immediate synergistic benefits to all of our business units."
On March 22, 2000, Auteo Media announced by press release that its common stock would be quoted on the OTC Bulletin Board under the new symbol AUTM. The release stated that Auteo Media combines a unique blend of automotive products and solutions to consumers and car dealerships through its five business units and e-commerce sites: Northwest and California Dealer Specialties, Autoloco.com, Bidthatcar.com, PartCart.com, PocketAuto.com and ContactAuto.com.
Auteo Media's divisions include the following:
Northwest and California Dealer Specialties -- consists of data collection, digital photography and Internet exposure. Auto Media operates a profitable data collection, point-of-purchase marketing and Internet exposure operation that services over 120 new car dealerships weekly.
AutoLoco.com -- consists of an Internet catalogue of over 10,000 used cars and trucks updated every night from more than 100 Washington and California automobile dealers. The site includes window stickers on every vehicle, price and a photo of the vehicle.
BidThatCar.com -- consists of an on-line car-bidding auction that allows participants to buy new and used vehicles at the bidding price.
PartCart.com -- will be a comprehensive e-commerce site that allows automobile owners and dealers to purchase a variety of automotive parts and accessories on-line.
PocketAuto.com and ContactAuto.com -- an innovative Internet-based system that will allow auto dealers and consumers to communicate, purchase or obtain information on vehicles via a variety of telecommunications and lead management tools. These Web sites are in their late stages of development.
"We believe we are now better positioned to generate greater market interest and support from the financial community, as we expand into the $500-billion dollar automotive marketing arena as an OTC Bulletin Board company," said Mr. Van Leeuwen. "We look forward to disseminating financial information on the company, as well as keeping our investors and other interested parties informed about critical company developments."
Takeover bid/merger analysis
The company has previously informed shareholders of its desire to diversify its business interests into the technology and e-commerce sector. This decision was born out of the lack of success to date of the company's oil exploration program in Trinidad, and the diminished potential for possible future financing and shareholder value therefrom, compared with numerous possible investments opportunities in a variety of technology projects that clearly enjoyed the necessary attention of the capital markets.
The acquisition of a 5-per-cent interest in Tysa Corporation in December, 1999, together with the option to acquire a further 12.5-per-cent interest, was attractive as it represented the right mix of upside potential and was a company that demonstrated actual results, which were not always present in more conceptual technology companies.
Since that time, the remaining equity interest in Tysa Corporation not owned or under option by Abstract was acquired by Auteo Media, which has since concluded that 100-per-cent control of Tysa was important to the long-term success of the business. The merger proposal negotiated between the company and Auteo Media, and announced in Stockwatch March 31, 2000, proposes a share exchange on the basis of 4 Abstract shares for 1 Auteo Media share issued from treasury, resulting in the following capital structure for Auteo Media and making the company a subsidiary of Auteo Media.
Abstract Auteo Media
Pretransaction
shares issued 11,216,730 12,825,000
Escrow
cancellation -750,000
----------
Capital
reorganization -7,165,000
10,446,730
Share exchange
with Abstract
(4 to 1) -10,446,730 2,616,683
---------- ----------
Exercise of
outstanding warrants 225,000
Fully diluted
posttransaction
structure 8,501,683
Percentage held by
former Abstract
shareholders 30.78%
Based on this analysis, Abstract's shareholders would have a 30.78-per-cent interest in the public company Auteo Media after the merger, instead of the potential 17.5-per-cent interest in the private company Tysa before the transaction. This equity enhancement was negotiated to compensate for the following factors:
conversion of the company's passive investment to a direct interest, and the opportunity cost to Abstract of not seeking out other opportunities;
dilution to the former Abstract shareholders as a result of future Auteo Media financing(s) required to fully implement its business plan, and the planned introduction of an incentive stock option plan;
increasing competition in the technology sector and related market volatility;
acquisition premium attributable to conducting a minority interest purchase.
In addition, Abstract shareholders are receiving a market premium of 50.6 per cent based upon the following calculation involving the last available 10-day trading values (as of May 11, 2000) of Auteo Media and the company's shares:
Market premium:
10-day average close
price AUTM $ 7.15(U.S.)
Canadian equivalent/.675 $10.59
Share exchange effect/4 $ 2.65
10-day average close
price AEP $1.76 (Canadian)
Indicated premium $0.89 (Canadian)
Premium 50.6%
Information relating to the financial statements of Auteo Media and Tysa Corporation for the quarter ended March 31, 2000, and the year ended Dec. 31, 1999, respectively are available on the EDGAR database at www.sec.gov and in the company's public file www.sedar.com.
All of the above matters are subject to negotiation of definitive agreements and receipt of certain professional opinions and regulatory and judicial approvals, as well as approval by 75 per cent of Abstract shareholders who will vote on the statutory plan of arrangement at a special general meeting currently scheduled for June 21, 2000. The Canadian Venture Exchange has also required the company to distribute its information circular describing the proposed transaction to shareholders within 30 days of the date hereof.
(c) Copyright 2000 Canjex Publishing Ltd. canada-stockwatch.com
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