Bounty Group Buying Kaboose’s UK Assets

Bounty Group Ltd., a portfolio company of Barclays Private Equity, has agreed to buy the UK business of Kaboose Inc. (TSX: KAB), a family-focused media company. The deal is valued at approximately £54 million, including around £10 million in assumed debt. In a related deal, Kaboose is selling its North American assets to Disney Online for approximately $23.3 million.

 

PRESS RELEASE

 

Kaboose Inc. (TSX: KAB), one of the largest family-focused media companies in the world, today announced that it has entered into two separate agreements which together will effect the sale of substantially all of its assets. Following the completion of these two transactions, Kaboose intends on distributing the resulting net proceeds to its shareholders. The Company expects that such net proceeds will result in approximately $0.65 per share being distributed to shareholders in the months following completion of the transactions, which distributions represent approximately a 70% premium to the thirty-day average closing price of Kaboose’s stock on the Toronto Stock Exchange.

 

The two agreements will effect the sale of the Company’s UK business, being Bounty Group Limited, to a company controlled by funds managed by Barclays Private Equity Limited (“BPE”) and the sale of the Company’s North American business to Disney Online, a unit of Disney Interactive Media Group segment.

 

Jason DeZwirek, Chairman and Chief Executive Officer of Kaboose, said, “2008 was a difficult year for many businesses and shareholders, and Kaboose was no exception. With the fundamental shift in the sentiment of the capital markets in general and in the media and advertising sectors in particular, and having been approached by several large international media companies and global private equity institutions interested in our business, we felt compelled to re-examine our long-term plan. With the advice of our financial advisors, the Company’s Board of Directors determined that Kaboose could divest its assets and realize significantly greater value than we could deliver as an independent public media company in the foreseeable future.”

 

Rob Myers, Director of BarclaysPrivate Equity, a division of Barclays Bank PLC, said “We are excited by the opportunity to acquire Bounty. We believe that the unique nature of the Bounty model represents a genuinely attractive investment opportunity. The key strengths of the business and the support that Bounty provides to new mothers remains as relevant in the current economic environment as it has done over the last 50 years. We look forward to working with the highly experienced Bounty management team to further develop the business.”

 

Paul Yanover, Executive Vice-President and Managing Director of Disney Online, stated “This acquisition strengthens our position as a top entertainment destination for kids and families, and a trusted online resource for parents. These new Web properties complement Disney Online’s category-leading kids and family sites, broadening our audience and infusing an array of new content into our sites, particularly in the baby and mom categories.”

 

Sale of UK Business

 

Kaboose has entered into an agreement dated March 31, 2009 with BPE pursuant to which it has agreed to sell all of the issued and outstanding share capital of its UK subsidiary through which it owns Bounty Group Limited, the UK’s largest parenting club and the leading family destination online in the UK (the “Bounty Transaction”). The purchase price payable to Kaboose under the terms of the Bounty Transaction is (pnds stlg)54 million (approximately $97 million) in cash less third-party debt outstanding on closing which is expected to be approximately (pnds stlg)10 million (approximately $18 million). Closing of the Bounty Transaction is conditional on obtaining Kaboose shareholder approval and other customary conditions. The agreement between Kaboose and BPE provides for, among other things, a non-solicit covenant by Kaboose subject to customary provisions that entitle Kaboose to consider and accept a superior proposal relating to Bounty or all of the assets or share capital of Kaboose, and the payment by Kaboose to BPE of a termination payment of (pnds stlg)0.9 million if the Bounty Transaction is not completed as a result of a superior proposal.

 

Sale of North American Business

 

Kaboose has entered into an agreement dated March 31, 2009 with Disney Online, a unit of Disney Interactive Media Group segment pursuant to which it has agreed to sell substantially all of its North American assets, including all of its online media properties and related businesses (the “North American Transaction”). The purchase price payable to Kaboose pursuant to the North American Transaction is $23.3 million subject to a working capital adjustment. Closing of the North American Transaction is conditional on the closing of the Bounty Transaction, obtaining Kaboose shareholder approval, court approval and other customary conditions, including receipt of any necessary regulatory approval. The agreement between Kaboose and Disney Online provides for, among other things, a non-solicitation covenant by Kaboose, subject to customary provisions that entitle Kaboose to consider and accept a superior proposal in respect of a purchase of its North American assets or all of the assets or share capital of Kaboose, a right in favour of Disney Online to match any superior proposal and the payment by Kaboose to Disney Online of a termination payment of $465,000 if the North American Transaction is not completed as a result of the superior proposal.

 

Other Information

 

Kaboose shareholders will be asked to approve the Bounty Transaction and the North American Transaction at an annual and special meeting of shareholders which is expected to occur in May 2009 (the “Meeting”). The board of directors of the Company has unanimously recommended that shareholders vote in favour of each of the transactions at the Meeting. Shareholders will vote on each transaction separately and each vote will require the approval of two-thirds of Kaboose shareholders present in person or by proxy. Mr. DeZwirek has agreed with BPE to vote the shares controlled by him in favour of the Bounty Transaction and each of the directors and senior officers of Kaboose (including Mr. DeZwirek) have indicated to the Company that they intend on voting all their shares owned or controlled in favour of the North American Transaction. The Bounty Transaction and the North American Transaction are each expected to close within approximately 60 days.

 

The North American Transaction will be completed pursuant to a plan of arrangement under the Canada Business Corporations Act, which will also include a process to wind-up Kaboose following the completion of a court-approved claims procedure. In connection with the wind-up of Kaboose, it is expected that approximately $0.65 in aggregate per common share will be distributed to shareholders of record in two or more distributions, which will include the cash proceeds realized under the Bounty Transaction and the North American Transaction less any payments made in respect of Kaboose’s remaining ongoing costs and liabilities. The first distribution is expected to occur in the third quarter of 2009, following completion of a claims procedure that will be established under the supervision of an Ontario court. It is expected that following the distributions, Kaboose’s common shares will be cancelled and de-listed from the TSX. It is anticipated that the wind-up of Kaboose will be completed by the end of the first quarter of 2010, although the ultimate timing of each distribution and the wind-up of Kaboose may vary from what is expected. In addition, to the extent that, among other things: (i) transaction and wind-up costs; (ii) Kaboose’s net cash position at closing; (iii) the absence of unidentified claims; (iv) working capital of the North American business at the time of closing; or (v) foreign exchange rates are different than assumptions made by management, shareholders may receive aggregate distributions amounting to less than $0.65 per share. Accordingly, Kaboose can give no assurances as to the total amount and timing of distributions to Kaboose’s shareholders.

 

Each of these two transactions was entered into following a sales process undertaken by Kaboose and supervised by its Board of Directors with the assistance of the Company’s financial advisors, Allen & Company LLC and GMP Securities L.P. As part of this sales process, Kaboose entertained proposals from a number of potential purchasers of the Company as a whole, and of the UK business and the North American business separately. The Board of Directors of Kaboose has received separate fairness opinions dated March 31, 2009 from each of Allen & Company LLC and GMP Securities L.P. to the effect that each of the Bounty Transaction and the North American Transaction is fair, from a financial point of view, to Kaboose and that the expected distributions of approximately $0.65 in cash per common share is fair, from a financial point-of-view, to shareholders of Kaboose.

 

For the purposes of calculating amounts in connection with the Bounty Transaction, management of Kaboose have used a rate of exchange for the British Pound against the Canadian Dollar of (pnds stlg)1.00 = CAD$1.8.

 

Copies of the definitive agreements relating to the Bounty Transaction and the North American Transaction will be filed with the Canadian securities regulatory authorities and will be available at the Canadian SEDAR website at www.sedar.com. A management proxy circular in respect of the Meeting is expected to be mailed to shareholders in April 2009.

 

About Kaboose Inc.

 

Kaboose Inc. is a global media company fully dedicated to meeting the needs of moms and their families. Kaboose ranks as one of the world’s top five family destinations and is a respected leader in the online parenting category in three of the largest English speaking countries – the United States, Canada and the United Kingdom. Kaboose provides parents with an extensive array of relevant information, resources, tools and community that support their efforts during the parenting life cycle. Kaboose’s websites include its award-winning flagship, Kaboose.com, which gives moms the tools they need to plan an active, healthy and rewarding family life; Bounty, the UK’s favourite parenting club, providing information, support and products for young families; BabyZone.com, serving the needs of expectant and new moms; ParentZone.com, a family-focused local resource and event site; AmazingMoms.com, providing simple and easy solutions for birthday parties, family crafts and special occasions; and Funschool.com which promotes learning while helping kids have fun. Kaboose trades on the Toronto Stock Exchange under the symbol “KAB”