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CDNow in new merger
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July 13, 1999: 7:35 a.m. ET
Leading online music store to join with Columbia House direct marketer
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NEW YORK (CNNfn) - CDNow, the online music store that recently completed one merger, said Tuesday it would merge again - this time with Columbia House, a club-based direct marketer of music and videos.
CDNow also said Tuesday it will report lower than expected losses for the second quarter.
The new merger will result in a public company, with 37 percent shares owned by each of Columbia House's parents, Sony Corporation (SNE) and Time Warner (TWX), CNNfn's parent company. CDNow's existing shareholders will own the remaining 26 percent.
The new company will be an entertainment, e-commerce and direct marketing company that will be a key part of both Sony's and Time Warner's e-commerce activities.
Columbia House will continue to operate as a "club membership" company offering music and video products, while CDNow will remain an online music retailer. But the two companies' Web sites will be linked to the new company's online retail Web sites.
No value for the deal was disclosed.
CD Now has a market capitalization of about $665 million. On a pro forma basis - combined with the results of N2K before their merger earlier this year -- CDNow had revenue of $98.5 million in 1998, and estimated revenue of approximately $71 million during the first six months of 1999.
Columbia House had net revenue of approximately $1.4 billion, with earnings before interest, taxes, depreciation and amortization of approximately $100 million.
CDNow's board has unanimously approved the merger, which is still subject to approval by CDNow's shareholders and other regulatory conditions.
The deal is expected to close by year's end.
Shares in CDNow closed up 2-3/8 Monday at 22-1/4.
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