Vistaprint N.V. (
VPRT
)
recently signed a definitive acquisition agreement with Webs, Inc.,
the do-it-yourself suite of websites, Facebook Pages and mobile
presence solutions for small businesses. Per the agreement,
Vistaprint will acquire Webs for $117.5 million, of which $100.0
million will be in cash and $17.5 million in restricted shares. The
transaction is expected to close within one month.
There is a bunch of attributes that made Webs a lucrative
acquisition target. Its free website and Facebook business pages
are in sync with the open business card offerings of Vistaprint.
Second, Vistprint seeks to capitalize on large pool of customer
that Webs currently boasts of. Third, the customer centric business
approach of Webs complements Vistaprint's technology, manufacturing
and marketing capabilities. Finally, Webs has tight grip in several
emerging markets in which Vistaprint aims to expand.
Vistaprint management has been on an acquisition spree for quite
some time. In early November, the company acquired leading European
photo-book provider Albumprinter Holding B.V. with the intent to
further strengthen its pan-European customer base.
We view the Webs deal as strategically positive for both
parties, given that Webs is not a profitable company currently.
Post acquisition, Vistaprint will retain all managers and employees
of Webs. This acquisition is in sync with Vistaprint's strategy to
be more upbeat in marketing, geographic reach and service
operations.
Although we prefer management's efforts to revamp its business,
execution risks cast a cautious outlook on the stock. Apart from
acquisitions, Vistaprint has embarked on an extensive investment
plan in manufacturing to improve product quality and lower unit
manufacturing costs as well as in marketing to facilitate revenue
and earnings growth over five years. The initiative will likely
drag down Vistaprint's net margins in fiscal 2012 from the fiscal
2011 level.
On a GAAP basis, Vistaprint expects the Webs transaction to
lower earnings in fiscal years 2012 through 2014 and become
accretive after that. On a non-GAAP basis, the transaction is
expected to be dilutive in fiscal years 2012 and 2013 and become
accretive thereafter.
Irrespective of the acquisition, Vistaprint will likely deliver
modest EPS growth from fiscal 2012 to 2013, and then strong growth
in fiscal years 2014 through 2016. This muted guidance keeps us on
the sidelines for the near term.
The nagging tension over the Euro-zone debt crisis also poses
some concerns given Vistaprint's increasing exposure in that
region. This is validated by the deceleration in sales growth in
Europe in the first quarter of 2012.
Vistaprint, which competes with the likes of
TeleTech Holdings Inc.
(
TTEC
) and
Sykes Enterprises Inc.
(
SYKE
) currently, retains a Zacks #3 Rank that translates into a
short-term Hold rating.
SYKES ENTRP INC (
SYKE
): Free Stock Analysis Report
TELETECH HLDGS (
TTEC
): Free Stock Analysis Report
VISTAPRINT NV (
VPRT
): Free Stock Analysis Report
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