Demand Considers Company SplitTuesday, February 19, 2013
Demand Media announced Tuesday that it is considering splitting into two publicly traded companies.
The board will look into a plan to spin off Demand’s domain name business – including its registrar eNom – into an independent company separate from Demand’s media and web properties – such as how-to website eHow.com and health website Livestrong.com.
“We believe a separation will position each business to better pursue its specific strategic priorities and vision, as well as improve transparency for investors and enable the capital markets to better assess each company’s value, performance and potential,” Chief Executive Richard Rosenblatt said in a statement.
Although Demand’s signature business is content creation, it has been building up its domain business. In January it purchased registrar Name.com, which will allow it to sell new top-level domain names such as dot-democrat or dot-republican instead of the standard dot-com.
The split, which must receive shareholder approval, would happen as a tax-free spinoff that would distribute shares of the domain business to shareholders. It could take place within nine to 12 months.
Announcement of the proposed split came as Demand announced its fourth-quarter and full-year earnings.
The company reported net income of $4.7 million (5 cents a share) for the quarter ended Dec. 31, up from a loss of $6.4 million for the same period a year earlier. Revenue was up 22 percent to $103 million.
For the year, Demand reported a net income of $6.2 million (7 cents), up from a loss of $18.5 million in 2011. Revenue rose 17 percent to $381 million.
Rosenblatt attributed the revenue increase in part to the growth of its domain business.
Shares surged in after-hours trading. The stock was up $1.16, or nearly 15 percent, to $9 on news of the split.
Shares had previously closed down 7 cents, or less than 1 percent, to $7.84.