New Motion, doing business as Atrinsic has acquired the assets of Ringtone.com, a mobile entertainment destination for downloadable mobile content and a highly valuable Internet domain which receives more than 1,000 signups per day.
Based on existing subscribers and historical retention rates, Ringtone.com is expected to generate a higher return on the companyÃ's marketing investments than if it had organically acquired these customers during fiscal year 2008; subsequently, the company also expects to materially reduce its annual customer acquisition budget and reconfirms its 2008 pro forma guidance of US$145 million to US$160 million in revenue with adjusted EBITDA of US$15 million to US$20 million.
Management expects to expand the use of the assets purchased from Ringtone.com from solely a subscription based model into a more flexible and robust business model with multiple revenue streams, including an ad-supported model.
Ringtone.com was a wholly-owned subsidiary of W3i Holdings, a provider of integrated desktop marketing and mobile marketing solutions.
In consideration for the assets acquired, Atrinsic will pay W3i $6.25 million in cash, offset by $1.5 million in working capital for a net cash outlay of $4.75 million. In addition, W3i will receive a $1.75 million convertible note, with a 10% coupon and a term of one year. This note is optionally convertible by W3i into Atrinsic common stock at a 30% share price premium based on the average market price of AtrinsicÃ's common stock for the 10 trading days preceding the close of the transaction.
Burton Katz, the CompanyÃ's CEO, commented, "Ringtones are the historic growth driver behind worldwide mobile content sales. Over the past year and a half, there have been fundamental shifts in the subscription based business model supporting these services creating unique opportunities in a business continuing to see strong consumer demand. This accretive asset purchase enables us to re-enter the ringtone space, in what still represents an approximate $4 billion global business, with a low-cost platform that will leverage the popular ringtone.com domain and implement a new, ad-supported business model. This is an ideal transaction for Atrinsic and its shareholders, as it provides a favorable cost structure, creating an even more efficient customer acquisition method than the industry leading cost structure with which we acquire subscribers today. In this market, Atrinsic will continue to evaluate acquisitions which it believes will create shareholder value."
Posted to the site on 4th July 2008
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