When United Online Inc. announced this year that it would acquire national floral retailer FTD Group Inc., it left some analysts wondering: How would an online service provider run a flower business?
United Online Chief Executive Mark Goldston has a simple answer: He won’t have to.
Instead of tinkering with FTD’s operations, which he praised as “tremendous,” Goldston said United Online would use its extensive Internet advertising and marketing experience to drive more customers not to mention its existing 50 million subscribers to the already sizable floral retailer.
“It’s like we’ve got a 50 million-person concert in Central Park, and we just reeled a retail store right in the middle of it,” Goldston told the Business Journal after the acquisition was finalized last week.
Under terms of the deal, FTD shareholders will receive $441 million, consisting of about $307 million in cash, and about 12.3 million shares of United Online common stock.
FTD will become a wholly owned subsidiary of United Online. It will keep its U.S. headquarters in Downers Grove, Ill., and its international headquarters in the United Kingdom.
Still, Goldston may have to get his hands a bit dirty.
FTD Chief Executive Michael J. Soenen has announced he will leave the company once the deal closes, though he plans to consult with United Online through March. That means Goldston will be faced with the task of choosing a top executive for the floral business.
On the surface, the two companies seem vastly different.
United Online, based in Woodland Hills, is an Internet and e-mail provider under the NetZero and Juno brands. It has branched out into the Classmates.com networking site and the online rewards site MyPoints.com.
FTD, meanwhile, links floral shops across the country, and has recently established a large Internet presence through FTD.com.
But Goldston said United Online and FTD fit better than most people initially assumed. Users of the two companies already share similar demographics, which would make leveraging the deal for advertising revenue easier.
“We’re going to use our consumer-brand marketing expertise on what is arguably one of the most recognizable brand names in the country,” he said.
Yun Kim, an analyst with San Francisco-based Pacific Growth Equities LLC, agreed the deal was a shrewd one that posed little risk to United Online given that FTD was growing at only about 5 percent a year.
“They really didn’t pay a lot. All they have to do is show better growth than 5 percent and their strategic rationale works,” he said.
Kim said he expected United Online’s experience in Internet advertising and marketing to boost FTD’s sales: “Everybody needs to send flowers for Mother’s Day and all that stuff.”
The $754 million acquisition further propels United Online away from the shrinking business of dial-up Internet. About 25 percent of the company’s revenue will now come from communications, down from 60 percent a few years ago.
