Online Marketer Target of Bid By Furious Investor
By CONOR DOUGHERTY
Staff Reporter
A Dallas-based investor has submitted an unsolicited bid for MaxWorldwide Inc., the embattled online marketing firm formerly known as L90 Inc.
Newcastle Partners L.P. has offered to pay 75 cents a share, or about $17 million, for all the outstanding shares of MaxWorldwide, an 82 percent premium to the company’s 41-cent Oct. 16 closing price. According to MaxWorldwide’s report for the first quarter ended March 30, the most recent it has filed, the company has more than $50 million in cash and equivalents.
“We stand ready and willing to write a check for each and every share of this company,” said Mark Schwarz, a managing member of Newcastle Partners.
Newcastle’s offer was made to MaxWorldwide’s board in a Sept. 18 letter. The board did not respond to the letter, and Schwarz sent a letter the following week asking the company to release its financial results for the second quarter ended June 30, and to immediately disclose its cash balance.
Schwarz, who has nominated a slate of seven shareholders for election to the board, also asked MaxWorldwide to schedule its 2002 shareholder meeting and announce the status of pending investigations by the National Association of Securities Dealers and the SEC.
Mitchell Cannold, MaxWorldwide’s president and chief executive, said in a Sept. 25 letter included in a filing with the SEC that the company would consider the offer.
“An announcement of the board’s position, if any, will be made in due course after it has completed these deliberations,” the letter said.
Since canceling a proposed merger with eUniverse Inc. this year, MaxWorldwide has undergone a management shuffle and moved its headquarters from Marina del Rey to New York.
Schwarz charges that MaxWorldwide’s new management team is running the company for their benefit and burning through cash when they should just give the money back to investors.
“They’re at risk for us and other shareholders,” Schwarz said. “Right now, this thing is falling off the end of the earth.”
MaxWorldwide officials declined comment.
Newcastle owns more than 1.7 million MaxWorldwide shares, 7 percent of the company’s outstanding shares.
Schwarz is miffed because the deal with eUniverse, another online marketing firm, gave eUniverse L90’s non-cash assets while distributing cash back to shareholders.
That deal fell apart when an SEC probe into barter arrangements ultimately resulted in L90 reducing its revenue for all of 2000 and the first nine months of 2001 by about 10 percent. L90 Chief Executive John Bohan was ousted.
Cannold, the new chief executive, was given an employment contract that included base pay of $480,000 a year and 1.5 million stock options vesting over the next five years. He is also entitled to a $50,000 bonus for each $1 million that L90 beats its annual projections, even if a loss is projected, according to his employment agreement.
L90 Inc. reported a net loss of $6.9 million for the first quarter ended March 31, compared with a loss of $7.7 million in the like year-earlier quarter. First quarter revenues were $3.6 million, vs. $7.1 million in the first quarter of 2001.
