Article posted, by special permission of Merger Market, a Financial Times publication.
FriendFinder Networks, a private Boca-Raton, Florida-based online relationship and social networking company, could look to divest non-core businesses before its intended IPO, said three sources familiar with the company.
The company, formerly known as Penthouse Media, filed for an initial public offering in December, anticipating USD 460m in proceeds to help pay off more than USD 450m in debt. It will likely complete the offering before year end, said a source familiar with the situation. Meanwhile, FriendFinder could look to sell off non-core pieces of its business that may be distracting to potential investors, online dating industry consultant Mark Brooks said.
Sites that could be sold include GradFinder, a competitor of Classmates.com that does not fit well into FriendFinder’s portfolio, and Christian dating site BigChurch, “a misfit community” for the company, Brooks said. “Knowing the [management team] that owns these assets, they will probably look at parting with them.”
FriendFinder’s international properties could also be spun out to a media company with more expertise in certain geographic markets, said Noel Biderman, CEO of Toronto-based Avid Life Media, the holding company of dating sites like HotOrNot and Ashley Madison. He pointed to IAC-owned Match which took a 27% stake in European dating operator Meetic in February, in exchange for Match’s European operations, as an industry example of this. In the case of FriendFinder, its Latino dating site Amigos has a strong membership base, and could be sold to an acquirer that can better grow and monetize the brand, Brooks noted.
FriendFinder’s sites may fetch 7x to 8x EBITDA, Biderman said, using Match’s USD 80m acquisition of People Media in July as a comparable transaction.
FriendFinder operates a group of sites including AdultFriendFinder, as well as other targeted online dating and social networking businesses. The company would likely keep its highly lucrative adult sites while unloading other properties, sources agreed. Its adult social networking and live interactive video sites comprised 95% of the company’s revenue, as of six months ended 30 June 2008.
An online dating industry executive agreed that FriendFinder could look to sell the majority of its non-adult sites, saying, “Their only business is the adults business.” The executive said that when FriendFinder — then Penthouse Media —purchased parent company Various in 2007 for USD 500m, it may have kept Various’ mainstream sites to diversify outside the adult business but has since found these pieces irrelevant.
In the last six months ended 30 June 2009, FriendFinder had revenue of USD 164.9m with a net loss of USD (20.7m). It has cash of USD 28.3 as of its latest quarterly filing.
FriendFinder’s IPO is being underwritten by Renaissance Securities. The company is using Akin Gump Strauss Hauer & Feld LLP and Skadden, Arps, Slate, Meagher & Flom LLP as its legal advisors.
FriendFinder executives declined to comment, citing the company’s quiet period.
(by Olivia Oran in New York and Deborah Balshem in Florida)
PRESS RELEASE – Oct 28 – The first iDate Awards ceremony will be held the night of January 28, 2010 in Miami. The iDate Awards will highlight the people and companies who exemplify the best and most innovative aspects of the Internet dating and matchmaking industry. Nominations are now open to the public at iDateAwards.com. Both industry professionals and the general public are encouraged to nominate or vote for the best candidates in each of the award categories.
