NEW YORK, NY -- 03/28/08 --
Merisel, Inc. (PINKSHEETS: MSEL), a leading
provider of visual communications and brand imaging solutions to the
consumer products, retail, advertising and entertainment industries, today
announced that it has entered into a definitive agreement pursuant to which
it will be acquired by TU Holdings, Inc., a wholly owned portfolio company
of American Capital Strategies, Ltd. (NASDAQ: ACAS), for $5.75 per share in
cash.
Donald R. Uzzi, Chairman and Chief Executive Officer of Merisel, said, "We
believe that this transaction delivers substantial value to our
stockholders. For over a year, our Board of Directors has examined
numerous strategic alternatives focused on enhancing value and has
determined that a transaction with American Capital is the best alternative
for our stockholders." Ronald P. Badie, lead director, added, "We look
forward to working with American Capital to close this transaction quickly
and to smoothly transition the Merisel business to its new owners."
Dean Anderson, Managing Director of American Capital, said, "Merisel is a
leader in the visual communications and brand imaging solutions business.
We are excited about this opportunity and anticipate closing this
acquisition in the second quarter of 2008."
The transaction has been unanimously approved by Merisel's Board of
Directors, which will recommend that Merisel's stockholders approve the
transaction. Affiliates of Stonington Partners, L.P., Merisel's largest
stockholder, who collectively own approximately 60% of the company's
outstanding common stock, have entered into an agreement to vote in favor
of the transaction. Approval of the transaction requires the affirmative
vote of a majority of the outstanding Merisel shares and is subject to
certain other customary closing conditions. The shares held by the
affiliates of Stonington Partners represent more than a majority of
Merisel's outstanding shares of common stock. The transaction is expected
to close during the second quarter of 2008. The exact timing of the closing
of the transaction is dependent on the review and clearance of necessary
filings with the Securities and Exchange Commission and satisfaction of
other customary closing conditions.
Robert W. Baird & Co. Inc. acted as financial advisor to Merisel, Houlihan
Lokey Howard & Zukin Financial Advisors, Inc. acted as financial advisor to
the Special Committee of the Board of Directors of Merisel, and Weil,
Gotshal & Manges LLP, and Rosner & Napierala, LLP provided legal advice.
O'Melveny & Myers LLP acted as legal counsel to American Capital.
Financial Results (in thousands except for per share amounts)
Merisel also reported today financial results for the Fourth Quarter and
year ended December 31, 2007.
Merisel reported Fourth Quarter 2007 earnings of $4.13 per share (diluted)
versus income of $.55 per share for the Fourth Quarter of 2006, and Full
Year 2007 earnings of $4.22 per share versus income of $.66 per share in
2006. Excluding Discontinued Operations, Merisel reported earnings of
$4.13 per share in the Fourth Quarter of 2007 versus income of $.58 per
share in the Fourth Quarter of 2006 and Full Year 2007 earnings of $4.20
per share versus income of $.56 per share in fiscal 2006.
In the Fourth Quarter of 2007, the Company further reduced the valuation
allowance against its deferred tax asset by $31,375 on the belief that it
will earn sufficient future income from operations to be able to utilize
its Net Operating Loss Carryforwards ("NOLs"). The Company utilizes the
liability method of accounting for income taxes as set forth in Statement
of Financial Accounting Standard No. 109, "Accounting for Income Taxes."
Under SFAS 109, when a Company believes that it may not have sufficient
income to be able to utilize its deferred tax assets, (NOLs in the
Company's case) a valuation allowance is recorded. This reduced valuation
allowance resulted in an income tax benefit of $30,594 for the Full Year of
2007 compared to a benefit of $3,280 in 2006 when a smaller reduction of
the valuation allowance was made.
"We are pleased with our results for the quarter and full year," stated
Donald. R. Uzzi, Chairman and CEO. "Revenues increased by 10% fueled by a
full year of sales from our 2006 acquisitions as well as solid organic
revenue growth. We continue to increase client service offerings and
expand our client base. Concurrently we improved gross margin by 240 basis
points through continuing production labor efficiencies and lower raw
material costs driven by centralized procurement. Merisel is a stronger
enterprise today and a leading service provider to the Visual
Communications and Brand Imaging Solutions market."
Results of Operations (In thousands except per share amounts)
2007 2006
---------------------------- ----------------------------
Existing Expanded Total Existing Expanded Total
Operati- Operati- Operati- Operati- Operati- Operati-
ons ons ons ons ons ons
Net sales $ 79,713 $ 13,468 $ 93,181 $ 78,452 $ 6,268 $ 84,720
Gross profit 37,183 6,707 43,890 34,061 2,938 36,999
Selling,
general, and
administrative 33,141 5,175 38,316 30,484 2,179 32,663
Restructuring
charge - - - 724 - 724
Interest
expense (828) (31) (859) (1,054) (12) (1,066)
Interest income 448 25 473 481 - 481
For the purposes of the above table and the following discussion, "Existing
Operations" refers to the Company's businesses acquired during the fiscal
year ended December 31, 2005, and "Expanded Operations" refers to the
Company's businesses acquired during the fiscal year ended December 31,
2006, specifically DCS and AdProps which were acquired in May 2006 and
Fuel, which was acquired in October 2006. The above table represents the
key financial statement areas of operations.
The Company reported net income to common stockholders of $33,848 for 2007
compared with $5,135 for 2006. These results include a gain on the sale of
discontinued operations of $145 and $748 for 2007 and 2006, respectively.
Comparison of Fiscal Years Ended December 31, 2007 and December 31, 2006
Net Sales -- Net sales increased by $8,461, or 10.0%, from $84,720 for the
year ended December 31, 2006, to $93,181 for the year ended December 31,
2007. Net sales from Existing Operations increased $1,261, or 1.6%, from
$78,452 for the year ended December 31, 2006, to $79,713 for the year ended
December 31, 2007.
Gross Profit -- Gross profit increased $6,891, or 18.6%, from $36,999 for
the year ended December 31, 2006, to $43,890 for the year ended December
31, 2007. Gross profit from Existing Operations increased $3,122, or 9.2%,
from $34,061 for the year ended December 31, 2006, to $37,183 for the year
ended December 31, 2007. Gross profit as a percentage of sales, or gross
margin, increased 3.4% from 43.7% for the year ended December 31, 2006 to
47.1% for the year ended December 31, 2007. The increase in gross margin is
attributable to production labor efficiencies at Color Edge and Crush
Creative, and a reduction in raw material costs and production supplies
driven by centralized procurement.
Selling, General and Administrative -- Selling, general and administrative
expenses increased $5,653, or 17.3%, from $32,663 for the year ended
December 31, 2006, to $38,316 for the year ended December 31, 2007.
Selling, general and administrative expenses from Existing Operations
increased $2,657 or 8.7% from $30,484 for the year ended December 31, 2006
to $33,141 for the year ended December 31, 2007. Part of the increase in
selling, general, and administrative expenses from Existing Operations is
attributed to $1,827 incurred in connection with the Company's decision to
explore strategic alternatives.
Restructuring Costs -- The Company recorded a restructuring charge of $724
related to the restructuring of the wet processing film business for the
year ended December 31, 2006. There was no restructuring charge for the
year ended December 31, 2007.
Interest Expense -- Interest expense for the Company decreased by $207, or
19.4%, from $1,066 for the year ended December 31, 2006 to $859 for the
year ended December 31, 2007. The change primarily reflects a decrease in
loan balances due to payments of principal on capital leases and
installment notes.
Interest Income -- Interest income for the Company decreased by $8, or
1.6%, from $481 for the year ended December 31, 2006, to $473 for the year
ended December 31, 2007.
Income Taxes -- The Company recorded an income tax benefit of $3,280 in the
year ended December 31, 2006 and an income tax benefit of $30,594 for the
year ended December 31, 2007. The Company further reduced its valuation
allowance and recorded a deferred tax benefit in the amount of $34,972 for
the year ended December 31, 2007.
Discontinued Operations Income -- On April 17, 2006, the Company was
notified that a deed for real property securing a note receivable had been
transferred back to the Company in settlement of the note receivable. The
underlying real property was valued at $914 and recorded as assets held for
sale at December 31, 2006. On March 28, 2007, the Company sold the real
property for $1,192, net of expenses. The Company recorded income from
discontinued operations of $145 for the year ended December 31, 2007. This
figure consists of the sale price of $1,192, net of its cost basis of $914,
taxes of $112, and other expenses of $21.
Income from discontinued operations for the year ended December 31, 2006
was $748. On June 19, 2006, the Company recorded a gain of $1,250 on the
sale of an unsecured claim, net of other expenses of $342 and tax of $160.
Net Income -- As a result of the above items, the Company reported net
income available to common stockholders of $5,135 in the year ended
December 31, 2006 and reported net income available to common stockholders
of $33,848 for the year ended December 31, 2007.
Cautionary Statement
This release contains statements concerning Merisel's expectations for
future performance, as well as statements relating to the potential
acquisition of Merisel by American Capital, and are forward-looking
statements as that term is used in the Private Securities Litigation Reform
Act of 1995. Any such forward-looking statements are inherently speculative
and are based on currently available information, operating plans and
projections about future events and trends. As such, they are subject to
numerous risks and uncertainties. Actual results and performance may be
significantly different from expectations. The Company undertakes no
obligation to update any such forward-looking statements. Please see the
Company's filing with the Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K, for a discussion of specific risks
that may affect performance.
Important Merger Information
In connection with the proposed transaction, Merisel intends to file
relevant materials with the Securities and Exchange Commission ("SEC"),
including a proxy statement with respect to the proposed transaction. Such
documents, however, are not currently available. Investors are urged to
read the proxy statement regarding the proposed transaction when it becomes
available, because it will contain important information. Investors will be
able to obtain a free copy of the joint proxy statement/prospectus, as well
as other filings containing information about Merisel, without charge, at
the SEC's website (http://www.sec.gov) once such documents are filed with
the SEC. Copies of the proxy statement can also be obtained, without
charge, once they are filed with the SEC, by directing a request to
Merisel, Inc., Attention: Shareholder Relations, 127 West 30th Street, 5th
Floor, New York, New York 10001, (212) 594-4800.
Merisel and its directors, executive officers and other members of
management and employees may be deemed to be participants in the
solicitation of proxies from Merisel stockholders in respect of the
proposed transaction. Information regarding Merisel directors and executive
officers is available in Merisel's proxy statements for its 2007 annual
meeting of stockholders. Additional information regarding the interests of
such potential participants will be included in the proxy statement and the
other relevant documents filed with the SEC when they become available.
About Merisel
Merisel headquartered in New York, N.Y. is a leading visual communications
and brand imaging solutions provider to its clients. Merisel provides a
broad portfolio of digital and graphic services to clients in the retail,
manufacturing, beverage, cosmetic, advertising, entertainment and consumer
packaged goods industries. These solutions are delivered to clients through
its portfolio companies; ColorEdge, Crush Creative, Comp 24, It's in the
Works, Dennis Curtin Studios, AdProps, and Fuel Digital. Merisel has sales
offices in New York City, Atlanta, Los Angeles, Orlando, and Portland,
Oregon and, and production facilities in New York, New Jersey, Atlanta and
Los Angeles to ensure the highest quality solutions and services to our
clients. Learn more at www.merisel.com.
MERISEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
-------- -------- -------- --------
Net sales $ 24,055 $ 24,938 $ 93,181 $ 84,720
Cost of sales 12,299 14,217 49,291 47,721
-------- -------- -------- --------
Gross profit 11,756 10,721 43,890 36,999
Selling, general & administrative
expenses 10,241 8,939 38,316 32,663
Restructuring charge - - - 724
-------- -------- -------- --------
Operating income 1,515 1,782 5,574 3,612
Interest expense, net 36 273 386 585
-------- -------- -------- --------
Income from continuing operations
before provision for income tax 1,479 1,509 5,188 3,027
Income tax provision (32,178) (3,492) (30,594) (3,280)
-------- -------- -------- --------
Income from continuing operations 33,657 5,001 35,782 6,307
Income (loss) from discontinued
operations, net of taxes 2 (236) 145 748
-------- -------- -------- --------
Net income 33,659 4,765 35,927 7,055
Preferred stock dividends 536 494 2,079 1,920
-------- -------- -------- --------
Net income available to common
stockholders $ 33,123 $ 4,271 $ 33,848 $ 5,135
======== ======== ======== ========
Income per share (basic):
Income (loss) from continuing
operations available to common
stockholders $ 4.25 $ 0.58 $ 4.32 $ 0.56
Income from discontinued
operations, net of taxes 0.00 (0.03) 0.02 0.10
-------- -------- -------- --------
Net income available to common
stockholders $ 4.25 $ 0.55 $ 4.34 $ 0.66
Income per share (diluted):
Income (loss) from continuing
operations available to common
stockholders $ 4.13 $ 0.58 $ 4.20 $ 0.56
Income from discontinued
operations, net of taxes 0.00 (0.03) 0.02 0.10
-------- -------- -------- --------
Net income available to common
stockholders $ 4.13 $ 0.55 $ 4.22 $ 0.66
Weighted average number of shares
Basic 7,793 7,768 7,793 7,744
Diluted 8,027 7,816 8,016 7,816
Contact:
Jon Peterson
(212) 502-6570
Email Contact
