TYPE: 425
SEQUENCE: 1
DESCRIPTION: FILING OF COMMUNICATION
Filed by Juno Online Services, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: United Online, Inc.
Commission File No. 000-26009
NETZERO AND JUNO ANNOUNCE STRATEGIC MERGER
Companies Combine To Become Nation's
Second-Largest Internet Access Provider
New Company to be Named United Online, Inc.
WESTLAKE VILLAGE, CALIF. and NEW YORK, NY, June 7, 2001 - NetZero, Inc.
(Nasdaq: NZRO) and Juno Online Services, Inc. (Nasdaq: JWEB), two of the
country's largest providers of Internet access services, announced today that
they have agreed to a strategic merger. The union is expected to create the
nation's second-largest Internet access provider (after America Online, but
substantially ahead of Microsoft, Earthlink, and AT&T Worldnet), based on a
combined total of more than 7 million active subscriber accounts as of March
2001. Billable services accounted for approximately 1 million of the active
subscriber accounts of the two companies as of March 31, 2001.
Under the terms of the agreement, NetZero and Juno will become wholly owned
subsidiaries of a newly formed company called United Online, Inc. All
outstanding shares of both companies will be exchanged for shares of United
Online in an all-stock transaction. It is anticipated that immediately
following the closing of the transaction, NetZero stockholders will own
approximately 61.5% of the outstanding common stock of United Online, and Juno
stockholders will own approximately 38.5%, after giving effect to certain
stock issuances and subject to adjustment for outstanding warrants and
options.
Upon closing, NetZero stockholders will receive 0.2000 shares of United Online
for each share of NetZero, and Juno stockholders will receive 0.3570 shares of
United Online for each share of Juno. Given these relative exchange ratios,
the transaction has the implied effect of Juno stockholders receiving 1.7850
shares of NetZero for each share of Juno.
The new company is expected to trade on the Nasdaq Stock Market under the
symbol UNTD. The transaction will be accounted for using the purchase method
and is expected to be completed prior to the end of calendar year 2001,
subject to customary conditions, including regulatory approvals and approval
by both companies' stockholders.
Based on unaudited results for the quarter ended March 31, 2001, the
companies' combined quarterly revenues totaled $41.5 million. Revenues from
billable services accounted for 60% of total combined revenues, or $24.7
million, while the remaining $16.8 million came from various forms of
advertising and electronic commerce. The companies' combined cash balances as
of March 31, 2001 totaled $209.8 million.
Mark R. Goldston, current chairman and CEO of NetZero, will become chairman,
president and CEO of United Online, while Charles S. Hilliard, NetZero's
current CFO, will become CFO of the combined company. Selected senior
executives from both firms are expected to continue in key roles within the
new company. United Online will be headquartered in Westlake Village,
California, while maintaining significant operations in New York City and in
Hyderabad, India.
United Online plans to leverage consumer awareness of the NetZero and Juno
brand names by marketing its free services under the NetZero brand and its
billable services under the Juno brand. Management believes that the large
base of subscribers currently using each company's free Internet access
services represents an important potential source of future migration to
billable premium services with a low expected average subscriber acquisition
cost.
Management expects to incur restructuring and other transaction costs of
between $20 million and $25 million as a result of the merger. Its goal is to
significantly reduce operating expenses on a combined basis following the
merger. Operating efficiencies are expected to be gained in part through
facilities and workforce rationalization, elimination of telecommunications
infrastructure redundancies, merging of back-end technologies, and
consolidation of billing systems, marketing activities, and technology
development.
"This merger brings together two leaders in the rapidly growing value segment
of the Internet access market," said Goldston. "Both companies have built
widely recognized consumer brands that we plan to continue to leverage as we
work to attract new users and upsell our current subscribers to higher levels
of service and revenue. As the second-largest ISP in the United States, United
Online should represent a very attractive audience for the nation's largest
marketers and advertisers. Equally important, we expect the merger of our two
companies to generate significant synergies that will result in increased
financial strength, numerous operating efficiencies and an improved user
experience."
"This merger combines two companies that are highly complementary and bring
distinct strengths to the relationship," commented Charles E. Ardai, Juno's
president and CEO. "Juno's proven ability to convert free users into paying
subscribers will be particularly valuable as the combined entity focuses
increasingly on migrating users to billable premium services, while NetZero's
demonstrated marketing expertise should help United Online achieve its
subscriber acquisition and revenue generation goals."
Juno's chairman, Dr. David E. Shaw, who will be one of the largest beneficial
shareholders of United Online, added, "I'm extremely excited about this
merger, and about its potential for enhancing shareholder value. Each company
brings a formidable set of assets to this union, and I believe their value
could turn out to be even greater in the context of a combined company with
the scale and scope of United Online."
In connection with this merger, Morgan Stanley served as financial advisor to
NetZero and Deutsche Banc Alex. Brown acted as financial advisor to Juno.
A conference call will be held tomorrow, June 8, at 8AM PDT (11AM EDT) to
discuss the transaction. The call can be accessed live on NetZero's Web site
in the "Investors" section under the "Conference Call" tab at www.netzero.net,
and on Juno's Web site at www.juno.com/investor. A replay of the Webcast will
be available on both companies' Web sites for seven days following the call.
About NetZero
NetZero is a leading provider of Internet access and other Internet-related
services. The company offers consumers high-quality Internet access, a choice
of popular e-mail programs and convenient navigation tools that provide "speed
dial" to key sites on the Internet. The company also offers a broad range of
interactive marketing, research and measurement solutions.
Through proprietary technologies, NetZero offers advertisers unique targeting
capabilities through numerous online advertising and sponsorship channels. The
company's CyberTarget division offers marketers and advertisers mass-scale,
online market research and measurement services. NetZero is a Cisco Powered
Network, offering its Internet access services in more than 5,000 cities
across the United States and in Canada.
For more information, please go to www.netzero.net. To obtain a CD, please
call 1-800-DEFENDER.
About Juno
Juno Online Services, Inc. is one of the nation's leading Internet access
providers. Founded in 1995, Juno provides multiple levels of service,
including free basic Internet access, billable premium dial-up service, and
(in certain markets) high-speed broadband access. The company's revenues are
derived primarily from the subscription fees charged for its billable premium
services, and to a lesser extent from the sale of advertising and from various
forms of electronic commerce.
For more information about Juno, visit www.juno.com/corp/. To get a copy of
the Juno software, go to www.juno.com or call 1-800-TRY-JUNO
# # #
Active subscribers are defined as all registered subscriber accounts that
connected at least once during the month, together with all subscribers to a
billable service, in each case regardless of the type of activity or
activities engaged in by such subscribers.
The release contains forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These statements are based on management's current expectations or
beliefs and are subject to a number of factors and uncertainties that could
cause actual results to differ materially from those described in the
forward-looking statement. The forward-looking statements in this release
include, without limitations, future financial and operating results, and
timing and benefits of the merger. The following factors, among others, could
cause actual results to differ materially from those described in the
forward-looking statements: failure of the merger to close due to lack of
stockholder approval or other factors; inability to successfully integrate the
NetZero and Juno businesses; unexpected costs related to the merger or
integration of the NetZero and Juno businesses; failure of anticipated
synergies to materialize; failure of the current free user base to migrate to
billable services; potential duplication between user bases; increased
competition and its effects on pricing, spending, third-party relationships,
the subscriber base and revenues; inability to establish and maintain
relationships with commerce, advertising, marketing, technology and content
providers; inability to retain key personnel of NetZero or Juno; and inability
to maintain or grow the United Online subscriber base. United Online's
business will be subject to the risks inherent in each of Juno's and NetZero's
existing businesses. More information about potential factors that could
affect the combined company's business and financial results is included in
each of NetZero's and Juno's most recent Form 10-Q and other filings with the
Securities and Exchange Commission (http://www.sec.gov) including (without
limitation) information under the captions "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Risk Factors."
Additional information will also be available once United Online files its
registration statement with the Securities and Exchange Commission with
respect to the proposed transaction.
Contacts:
Peter Delgrosso
Public Relations / Investor Relations
NetZero, Inc.
805-418-2388
pdelgrosso@corp.netzero.net
Gary Baker
Public Relations
Juno Online Services, Inc.
212-597- 9005
pr@support.juno.com
Becky Yeamans
Investor Relations
Juno Online Services, Inc.
212-597-9274
ir@support.juno.com