LIBERTY DIGITAL TO BUY STAKE IN TEEN SITE
Byline: Vicki M. Young
NEW YORK — Liberty Digital Inc. has agreed to invest about $54 million in Alloy Online Inc., a leading Internet destination site for teens, in a strategic partnership arrangement that would give Liberty about a one-sixth stake in Alloy.
Under the terms announced Monday, Alloy will receive $10 million in cash and 837,740 shares, worth $44 million, of unrestricted Liberty Digital common stock. Liberty will receive 2.9 million shares of newly issued Alloy stock for $19 per share.
The purchase price represents a 24 percent premium to the closing price of Alloy stock on Friday. Shares of Alloy on Monday were up 10.2 percent, or 1 9/16, to 16 7/8 in over-the-counter trading. The deal is expected to close in about 30 days.
Alloy, based in Manhattan, sells apparel, accessories and home furnishings online and through its Web site and catalog operation to Generation Y, kids between the ages of 10 and 24 who account for 56 million of the U.S. population.
For the quarter ended October 1999, Alloy had more 1.3 million users. The company’s reach in December 1999 was 1.1 percent, or 692,000 unique visitors, who spent an average of 20 minutes on the site per month, according to Media Metrix.
Liberty focuses on the emerging field of interactive television and makes investments in interactive media and content companies. Among the private companies it has invested in are AT&T Access, Pogo.com, Digital Health Group, DMX/MTVN Online, KPCB Java Fund, HomeGrocer.com and Replay Networks. Liberty also has made investments in public companies, such as Priceline.com Inc., Sportsline USA, iVillage Inc. and Drugstore.com Inc.
Matt Diamond, Alloy’s chairman and chief executive officer, said in a statement, “We are excited that Liberty Digital has selected Alloy as its anchor in the teen space, particularly as we prepare for the future convergence of broadband and television. In a short period of time, we have been highly successful in expanding Alloy’s Web-centric, multimedia platform by marketing our content and commerce across the Internet, television, film and print.”
Diamond added, “We plan to expand our leading e-commerce presence in the tech-savvy Gen Y market, which is a natural target demographic for Liberty Digital as it continues to build an early leadership position in the commerce-focused interactive television space.”
In a research report issued Monday, analysts at Robertson Stephens wrote, “Liberty Digital’s investment in Alloy reflects its leadership position in the Gen Y category and validates the company’s unique business strategy, which integrates e-commerce, interactive content and digital media.”
The report continued, “Liberty Digital’s $54 million investment should provide Alloy with the necessary capital to fuel its aggressive acquisition strategy and positions the company as Liberty Digital’s acquisition vehicle for teen-related interactive media properties.”
Alloy said the two companies would work together to target Alloy’s teen demographic through Liberty’s interactive television-based commerce initiative. Lee Masters, president and ceo of Liberty, will join Alloy’s board.
Masters, said in a statement, “Gen Y, which thrives on interactivity and readily adopts new technologies, will be a core demographic for our interactive TV offerings. Alloy’s robust revenue growth validates its position as a leading player in the teen demographic.” He added that Alloy’s growth, dynamic business model, strong brand and innovative management team represented “important motivating factors” in its investment.
The Robertson Stephens report said Liberty’s strategic relationship with AT&T should provide the company with the right to use at least 12 channels on AT&T’s planned interactive television space. Although the AT&T project is several years away, Alloy is expected to play a key role in Liberty’s teen-oriented programming.
Since the beginning of the year, Alloy has been on a roll, entering into partnerships with strategic players as it expands its base of services.
Agreements include iFuse for entertainment content, free test preparation services powered by admission test preparation specialist Kaplan, a partnership with Penguin Putnam Books to publish a teen book imprint series, sports content from Bluetorch.com and an arrangement with Theglobe.com to provide teens with their own home pages.
Alloy is set to announce fourth-quarter results after the market closes on Thursday.