PhillyDeals: New Hope social-media firm set to be bought

The Adidas Store at the Walk, Atlantic City's retail area opposite the Boardwalk. The development was bought last week by Tanger Factory Outlet Centers Inc.
The Adidas Store at the Walk, Atlantic City's retail area opposite the Boardwalk. The development was bought last week by Tanger Factory Outlet Centers Inc. (ERIC MENCHER / File Photograph)
Posted: July 21, 2011

Are social media - Facebook, LinkedIn, Twitter, and their wannabes - America's next big business, or just the latest Wall Street bubble?

Quepasa Corp., a Miami-based, Latin America-focused social-media holding company run by former JPMorgan Securities manager John Abbott, said Wednesday that it had agreed to pay $82 million in stock and $12 million in cash, pending shareholder approval and financing, for New Hope-based myYearbook.com, a teen-focused social-media website.

Although the total price isn't much less than Quepasa was worth on the lowly American Stock Exchange before the deal was announced, the news sent the acquirer's stock up 39 percent Wednesday.

Besides founder Geoff Cook and other employees, myYearbook's financial backers include First Round Capital, of West Conshohocken, and a couple of Silicon Valley venture firms, which invested a total of $17 million in the mid-2000s.

Cook, in a letter to his company's 100 workers, said he's keeping his job, and so are they: "I view this deal as a stepping-stone to building a billion-dollar global brand around social discovery."

What's that? Cook said that means Web and smartphone users pick myYearbook to "meet new people," in contrast with Facebook's focus on connecting "to people you already know."

If this is the wave of the future, I asked, why sell now? "To grow that [on our own] it would take an enormous amount of effort and money," Cook told me. Now, Quepasa can help provide that. He said his investors didn't pressure him to sell.

MyYearbook claims $23.7 million in sales last year, mostly from online advertising (80 percent), but also through a "virtual currency," Lunch Money, that users buy to send one another. The company, which recruits customers through websites and smartphone apps, says it made $4.9 million in earnings before interest, taxes, depreciation, and amortization.

In its announcement of the deal, Quepasa reported sales on its Spanish- and Portuguese-language websites and other services of about $10 million and EBITDA of $1 million.

Facebook "has no natural advantage" in helping users meet new people, Quepasa said in a Securities and Exchange Commission filing detailing the offer. The combined companies will use games and the virtual currency to attract more teenage users and the advertisers and data miners who love them.

MyYearbook reported 33 million registered users, with an average age of 19. Quepasa says it has 38 million users of its own, served from offices in Mexico, Brazil, Los Angeles, and Florida. Cook said Quepasa's Brazil-based "social game" development group will help boost sales and profits, enabling the combined companies to avoid the forces that "capsized Bebo, Myspace, and so many other social networks."

Quepasa investors include the Mexican industrial conglomerate Altos Hornos de Mexico SA de CV (AHMSA), where Abbott worked after leaving JPMorgan in 2005.

Besides First Round (a second-round investor), myYearbook backers include "angel investors" Terry and Eva Herndon, a Carlisle, Mass., couple who read Cook's 2000 Wired magazine feature about being a "dorm-room entrepreneur" at Harvard University (he had a resumé-writing site); and two Silicon Valley investment firms, Norwest Venture Partners and lead investor US Venture Partners. Together, they put $17 million into myYearbook ($4.1 million in 2006, $12.8 million in 2008). Under terms of the proposed deal, not all shares can be cashed out immediately.

Closures here

Among the hundreds of data sites, small and large, that the federal government said Wednesday it plans to close or consolidate to save money, four are in Philadelphia: two for the Department of Treasury, one each for Homeland Security and Justice.

But the list appears to have taken government departments by surprise: None of the three agencies was initially able to say how many jobs were affected.

Trust us?

PNC Financial Services Group, the largest bank based in Pennsylvania, reported a "much stronger than expected" second quarter, earning $912 million, up from $832 million a year ago, R. Scott Siefers, bank analyst at Sandler O'Neill + Partners in New York, told clients in a note Wednesday.

In a possible sign of economic recovery, "PNC is capturing loan growth," Siefers wrote. "This quarter, average commercial loans grew at an 11 percent annual rate."

But Siefers also said PNC still suffers from the effects of low U.S. interest rates, pressure from Washington bank bureaucrats to raise capital - and investors' concern the company plans to keep buying other banks after recent expansion in the South, "regardless of management's assertions to the contrary."

Shore deal

Steven B. Tanger's North Carolina-based Tanger Factory Outlet Centers Inc. last week bought Atlantic City's Walk shopping-outlets development, constructed at a cost of $220 million in 2003-07, from Baltimore-based Cordish Cos., best known locally as the redeveloper of Comcast-Spectacor's Spectrum site.

Tanger paid $125.8 million in cash and assumed $73.5 million in debt - not just for the Walk, which claims 99 percent occupancy of nearly 500,000 square feet opposite the Boardwalk, but also for the 200,000-square-foot, 93 percent-occupied Ocean City Factory Outlets in Maryland. Tanger already owns the nearby Rehoboth, Del., outlet retail district.

The discount-oriented Walk is a lot busier than its high-end neighbor Pier Shops, which developer Taubman Centers Inc. gave back to Bank of America last year after falling behind on loan payments.


Contact columnist Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com, or @PhillyJoeD

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