Alloy Plans to Purchase Delia’s

NEW YORK Online and offline Gen Y marketing company Alloy said today that it plans to buy one of its chief competitors, Delia’s, in a deal valued at about $50 million.

The acquisition, subject to certain customary conditions, calls for Alloy to pay about 93 cents in cash for each of Delia’s nearly 54 million outstanding shares. The transaction is expected to close during the fiscal third quarter.

The addition of Delia’s, an online and offline teen-oriented retailer and direct marketing company, to Alloy’s portfolio of companies will create a multi-channel merchandise business with a $300 million annual revenue base and a database of more than 20 million names, said Alloy chairman and CEO Matthew Diamond. He projected that Delia’s would contribute $5-10 million in incremental earnings before interest, taxes, depreciation and amortization in fiscal year 2004.

Alloy said it expects the purchase to be initially dilutive due to the need to stabilize Delia’s retail operations and integrate both companies’ merchandise operations. However, the New York-based company said the near-term dilution would be offset by the benefits of scale, efficiency, growth, additional branding, media reach and long-term accretion that would result from the transaction.

In addition, Diamond said Alloy would pursue “strategic alternatives for the combined merchandise business,” saying that the company intends “to be proactive in exploring value creating transactions involving the merchandise business including receipt of a strategic investment, a merger, an outright sale or a full or partial leveraged spin-off to the public.”

Alloy, which began primarily as an Internet content company in 1996, has since sought to diversify its business offerings through a number of acquisitions to include catalogs, magazines, college guides and advertisement placement services. Some of its purchases over the past couple of years included youth marketer 360 Youth; Target Marketing & Promotions, a promotional and grassroots marketing company; Dan’s Competition, an Internet and catalog marketer targeting teenage boys and specializing in BMX biking; CASS Communications, an integrated advertising company; and youth publisher Carnegie Communications.

Alloy shares [ALOY] were trading on the Nasdaq midday at $7.04, up 19 cents or nearly 3 percent. The stock’s 52-week high is $14.75 and 52-week low is $4.15. Delia’s shares [DLIA] were trading at 90 cents, up 11 cents or 14 percent. The stock’s 52-week high is $4.14; its 52-week low, 22 cents.