NEWS4 May 2010

Infogroup first-quarter sales down, profits up

Financials North America

US— Infogroup has reported falling revenue but higher profits in the first quarter of 2010, dampening some of the optimism expressed earlier this year by CEO Bill Fairfield when he said the database marketing and research group was on course for single-digit organic growth.

Fairfield (pictured) and fellow executives were not prepared to discuss the results yesterday, citing Infogroup’s pending takeover by private equity firm CCMP Capital. Sales for the group were down 2.6% to $124.2m – though this marks an improvement on the 17% decline reported in Q1 2009.

Research revenue was down only slightly at $24.4m compared to $24.5m a year ago. Infogroup’s data division fared worse, with sales down 5% while services revenue was flat – though both divisions reported improved operating income. The research division made an operating loss of $40,000.

Infogroup’s difficulties in achieving its budgeted performance during the quarter impacted on the price CCMP was willing to pay for the business, according to filings with the Securities and Exchange Commission.

CCMP’s bid of $8 a share has been criticised by some minority shareholders for being priced too low, but documents reveal that the private equity firm had originally offered $8.40 with the possibility of increasing this to $8.60 subject to due diligence.

On 4 March, however, CCMP announced it would be lowering the proposed price to $7.60 per share because the year-to-date financial performance of the company through February 2010 was “materially below budget” with “limited evidence to support the company’s ability to achieve the 2010 budget”.

The price was eventually negotiated back upwards, putting the total value of the deal at $659m. This includes $468m to pay Infogroup stockholders, $166m to refinance the company’s debt and $25m to pay fees and expenses.

The acquisition is expected to be completed in the summer, subject to the approval of Infogroup shareholders and regulatory approvals.