NetZero and Juno Announce Merger

Companies Combine To Become Nation’s Second-Largest Internet Access Provider


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.

SOURCE: Businesswire