M&A Alert—April 10, 2017
Harland Clarke acquires online coupon code provider RetailMeNot for $630 million.
Author: Eric Risley, John Ascher-Roberts
Transaction Size: $630mm
On April 10, 2017, Harland Clarke announced an agreement to acquire online coupon code provider RetailMeNot (NasdaqGS: SALE) for $630 million or $11.60 per share in cash.
RetailMeNot operates as a savings destination for online and in-store purchases. The company’s marketplace connects consumers with retailers, restaurants, and brands. It offers digital discounts made available online or through mobile applications that are used by consumers to make online or in-store purchases directly from merchants. RetailMeNot reaches millions of mobile and online consumers and features more than 600,000 coupons and offers for 70,000 retailers. Its competitors include Checkout 51, Ebates, Groupon, Quotient Technology and Valpak.
Cotter Cunningham, CEO, founded the Austin-based company in 2009. The company received $300 million in funding from Adams Street Partners (Robin Murray), Austin Ventures (Thomas Ball), GV (Karim Faris), Institutional Venture Partners (Jules Maltz), JPMorgan Investment and Norwest Venture Partners (Josh Goldman) before going public in 2013. The company’s stock closed at $7.75 a share on April 7th at a market capitalization of $374mm. It has 527 employees primarily in Austin.
Harland Clarke Holdings operates through three business segments: Harland Clarke, Scantron and Valassis. The Harland Clarke segment offers payment solutions, transactional and secure document printing, direct online and print marketing services, and inbound and outbound contact center services, as well as customized social stationery, business, and home office products to financial and commercial institutions, consumers, and other businesses. The Scantron segment offers data management and market research solutions, as well as information technology consulting services and services to educational, commercial, and governmental entities worldwide through online and print channels. Valassis, which HCH acquired in December of 2013 for $1.9B (0.9x LTM revenue), provides its retail clients a variety of coupon marketing and advertising services including direct mail, email marketing, in-store advertising, display advertising, coupon dispensers, and digital coupons.
MacAndrews & Forbes, a diversified holding company owned by billionaire Ron Perelman, acquired HCH in October of 2005 for $800mm (1.3x LTM revenue).
Harland Clarke is acquiring RetailMeNot for $630 million or $11.60 per share in cash.
Transaction Value: $630M
TV / LTM Revenue 2.2x
Stock Price Premium 49.7%
Comparable transactions include Groupon’s acquisition of LivingSocial in October of 2016 (undisclosed), Ebates’s acquisition of Shopular in March 2016 (undisclosed), Rakuten’s acquisition of Ebates for $1B in September of 2014 (6.0x net revenue, covered here), Coupons.com’s acquisition of Buy Yub for $30mm in December of 2013 and Valpak’s acquisition of Savings.com for $100mm in June of 2012 (10.0x invested capital).
The acquisition follows a strange and sometimes combative relationship between Valassis and RetailMeNot. As Couponsinthenews.com reported, the two had previously partnered in 2009 to offer Valassis’ coupon database to RetailMeNot digital customers, but the relationship only lasted a few years until RetailMeNot replaced Valassis with Catalina’s Coupon Network, which was ultimately shut down in 2013. Later that year Valassis launched a direct competitor site Save.com, which also ultimately fizzled out by 2013 as well. Both have been trying to replace or recreate the other as both companies see the value in combining Valassis’ vast array of coupon offerings from its retail relationships with RetailMeNot millions of online consumers to make it a one-stop shop for online customers.
Architect Partners’ Observations
RetailMeNot shareholders must be happy with this outcome as the company escaped an increasingly challenging market with a successful exit. Although there had been previous success stories (i.e Ebates), recent years haven’t been kind to RetailMeNot nor its closest competitor Quotient Technology (aka Coupons.com). Having reached a max of $2.5B market capitalization in February of 2014, RetailMeNot has seen its stock price consistently drop to its latest close of $374mm. Similarly, Quotient reached a max of $2.3B in June of 2014 and has seen its capitalization shrink to its latest close of $820mm on April 7th.