MKTG Services Inc. has signed a definitive agreement to sell its Northeast direct marketing operations to CBC Cos. Inc., a privately held credit reporting company, for $11 million in cash plus the assumption of all directly related liabilities.
The sale involved the direct marketing operations in New York, Philadelphia and Boston, which include list management, list brokerage, database marketing, direct mail processing, media planning and buying and publisher’s representation services.
The operations are staffed with about 200 employees. No layoffs are expected, MKTG Services founder and CEO Jeremy Barbera said. He is expected to continue in his present role.
The sale comes as concerns persist about the company’s ability to continue as a going business. The company has limited capital resources and has incurred significant recurring losses and negative cash flows from operations, according to a recent filing with the Securities and Exchange Commission.
MKTG Services had been actively seeking to raise cash by selling off some of its assets. To help reduce expenses it has consolidated operations and significantly downsized its staff.
Barbera said the sale is a positive move for the operations, which had suffered in the weakened economy and from the effects of the Sept. 11 terrorist attacks as clients slowed or halted marketing campaigns.
"The direct marketing company was struggling financially and we wanted to make sure that it had a very strong, healthy, competitive future and this allowed that to happen," Barbera said. "It gives us access to money, technology and data that was missing from our infrastructures. We just didn’t have the kind of capital necessary for the company to grow."
Revenue for list sales and services declined from $14 million in 2001 to $8 million in 2002. Revenue from database marketing services dropped to $10.9 million from $13.5 million over the same period.
As a result of the transaction, the firm will focus on its telemarketing and telefundraising operations in Los Angeles, Barbera said. Revenue for the combined operations has remained relatively flat over the last few years at $15.2 million in 2000, $16.9 million in 2001 and $16 million in 2002.
The sale of the direct marketing operations is also expected to help the company comply with listing requirements on the Nasdaq SmallCap Market, the company said.
In June 2002, MKTG Services received notification from Nasdaq that its common stock had closed below the minimum $1 per share requirement for continuing listing on the Nasdaq Market. If the company cannot meet compliance by Dec. 24, Nasdaq will determine whether the company meets the initial listing criteria for the Nasdaq SmallCap Market. If it meets that criteria, the company will be granted an additional 180-day grace period to demonstrate compliance. Otherwise the securities may be delisted.
The last date the firm’s stock price closed above $1 was May 14, 2002. It was trading yesterday afternoon at 30 cents.
For the year ended June 30, 2002, the company reported net revenues of about $39 million, a 69% decrease from $127.7 million one year earlier. Its net loss was $68.5 million versus $66.5 million.
MKTG Services, formerly Marketing Services Group Inc., purchased Stevens-Knox List Management in January 1999 and acquired mailing list firm the Coolidge Co. in April 2000.
Ralph Stevens, a managing partner with MKTG Services and a former owner of Stevens-Knox List Management agreed that the sale would benefit the direct marketing operations.
"When business is whittled down and things start heading south, it helps to have a company out there that has come in and reinforced our ability to do business," Stevens said.
The closing is expected within 30 days.
CBC, founded in 1948 and headquartered in Columbus, OH, is a nationwide organization with more than 75 business offices and 1,500 employees.
In November, Equifax Inc. purchased consumer credit files and related customer accounts from CBC for $95 million in cash.
