United Airline/Mypoints.com

Source: http://www.123jump.com/story.htm?story_id=11764

New York, Jun 04, 2001 (123Jump via COMTEX) -- United NewVentures, the investment arm of UAL Corp. (UAL), announced this morning that it will acquire online marketing company MyPoints.com (MYPT) for $112.5 million.

The companies reported that UAL will pay $2.60 cash per share for all outstanding stock of MyPoints.com - nearly $1 per share more than MyPoints.com's market value prior to the announcement.

The acquisition of the direct marketing company is key for United Airlines; it will complement the company's initiative to sell more tickets online.

UAL Hurting

United Airlines is struggling. First quarter 2001, the company incurred a loss in excess of $300 million, which it blamed on rising fuel prices and the downturn in the economy. Worse, the company predicts that second quarter 2001 results will be lower than those of its first quarter.

Rising fuel prices and high labor costs have proved a major challenge for the airline. The company warned that if the situation doesn't turn around soon, it will most likely operate at a loss for the entire year 2001.

The demise of the dot-com marketplace affected United more than other airlines. The majority of the company's business is focused on business travel, especially the technology-intensive West Coast. As companies restructure, one of the first cuts to a budget is usually travel and sales/marketing expenses.

UAL has already implemented a cost savings plan, whereby the company will reduce operating costs by $200 million this year.

UAL Internet Site Booming

UAL's Web site has made solid progress since its inception and now operates in 26 countries. The airline reported that air bookings on united.com grew 73% year-over-year for the first quarter. Total United revenue from the Internet reached $225 million in the first quarter, versus $158 million a year ago - representing a 42% increase.

Selling electronic tickets saves oodles of money otherwise spent on labor and paper tickets - not to mention the fact that with the proper technology, United Airlines, which also owns US Airways, will be able to fill empty seats and economize.

Which is where MyPoints.com becomes key. Even though UAL is financially depressed, the company realizes the importance of its Web site and maintaining the best of technology and marketing promotions.

MyPoints.com currently has a database of more than 16 million e-mail addresses and has made a name for itself via marketing promotions through targeted e-mail - offering rewards to consumers that click through.

The company made $10 million in revenue for first quarter 2001, about $4.5 million less than first quarter 2000, which MyPoints.com blames on the collapse of the Internet advertising market.

As of March 31, 2001, MyPoints.com held approximately $98 million in cash and cash equivalents, which it insists is enough to reach break-even without concern. But the company is still losing money.

First quarter 2001, the company reported a net loss of $11.9 million, or 29 cents per share - a 27% decrease from a loss of $16.3 million, or 40 cents per share, in fourth quarter 2000. Things were looking better for the company prior to news of its acquisition.

The symbiosis of united.com and MyPoints.com is evident. united.com will benefit from MyPoints.com opt-in technology, which will allow United to peddle frequent flyer miles and attract online consumers. As for MyPoints.com - the pressure on profitability and survival will ease and the company will be able to function without the tension of angry investors demanding results.

On news of the acquisition, shares of MyPoints.com were up 58% to 2.53. Shares of UAL dropped .89% to 35.64.

Source: http://www.forbes.com/2001/06/04/0604united.html?partner=yahoo&referrer=

NEW YORK - Soon, United Airlines will reward loyalty not only with free seats, but also with sweater sets and videos, as the airline today said it would buy Internet direct marketer MyPoints.com. This will become a familiar refrain: Large companies desperate to beef up their Internet activities, but can't spare the time to do so, swoop in on promising but beaten-down dot-coms.

United (nyse: UAL - news - people) made the $112.5 million purchase through its wholly owned NewVentures subsidiary, the arm that sets Internet strategy for the airline. MyPoints (nasdaq: MYPT - news - people) is an unprofitable $63.5 million (2000 sales) company that rewards its members with points, which they redeem for shopping and services of MyPoints' advertisers/partners.

MyPoints will become part of United's NewVentures unit, which was started only seven months ago to help the airline capitalize on e-commerce opportunities. According to United, the airline did a little more than 15% of its business--$755 million--over the Web last year, up 89% from 1999.

Now, United adds MyPoints' 16 million subscribers to its own database of 40 million frequent flyers. It's unclear how many of MyPoints' subscribers are active participants in the service, but the company bills itself as the largest e-mail marketer and rewards program on the Web.

What's also unclear is exactly how United will use MyPoints' proprietary technology to reach potential customers and get relevant travel and account information to existing frequent flyers. But MyPoints Chief Executive John Fullmer says the pair can reduce their customer acquisition costs by pooling resources and broaden the demographic guaranteed to advertisers. That is, if United NewVentures and MyPoints can prove there is not a lot of overlap between their subscriber lists.

But there is no denying that United will use MyPoints to plug holes. "One of the things that's valuable is their expertise in technology and direct marketing," says United spokesman Andy Plews.

United clearly thought there was value in MyPoints, paying $2.60 a share, a 63% premium over its last closing price, on June 1. MyPoints shares were up 60% in midafternoon trading today, to $2.56, which is down more than 80% from its 52-week high. United was down over 2% to $35.14.

In the short term, this deal means a lot more to investors in MyPoints than United. After all, a $112 million deal is nothing compared to its pending acquisition of US Airways (nyse: U - news - people). But in the long term, doing more business (and marketing) over the Web can help reduce overhead and boost profits. Some of these smaller companies have only become more attractive acquisition targets. There will be many more.

Source: http://www.hoovers.com/co/capsule/0/0,2163,11520,00.html

When you're at the top, the sky's the limit. UAL's main subsidiary, United Airlines, is the world's #1 air carrier based on revenue passenger miles. United flies some 600 jets to more than 130 destinations in the US and 27 other countries from hubs in Chicago, Denver, Los Angeles, San Francisco, and Washington, DC. The carrier will expand with UAL's planned purchase of US Airways. United also leads the Star Alliance, a global marketing partnership with Lufthansa and others. UAL low-fare carrier United Shuttle offers about 455 short-haul flights daily to 23 western US cities. The company also operates United Express, a regional feeder system flown by independent carriers. Employees control 55% of UAL's voting stock.

 

Source: http://www.hoovers.com/co/capsule/5/0,2163,57405,00.html

MyPoints.com offers frequent surfer rewards to Internet users who respond to its targeted ads through Web sites and e-mail. The direct marketing firm maintains a database of 17 million consumers who have agreed to receive and respond to advertisements from companies such as BMG Entertainment, Home Depot, and Sprint. Each time members click on an ad or respond to an e-mail offer they rack up reward points that can be redeemed for gift certificates, travel rewards, and other items. In addition to its own loyalty programs, MyPoints operates custom marketing campaigns for its clients. The company is being acquired by an affiliate of United Airlines. Experian Information Solutions owns about 10% of the company.