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To: Glenn Petersen who wrote (87)8/12/2005 2:43:20 AM
From: Tom Caruthers
   of 133
 
Hi Glenn,

I agree. Nice quarter. Now if they could only make Wedding Channel go away. Hopefully the KNOT will prevail in legal proceedings and then just beat the pants off of WC in the market.

I was then thinking what would happen if they took Wedding Channel over? The $6M or so in legal fees goes away. They become the dominant player...the only player in the wedding space. All the ad revenue goes to them. Would I be willing to take a 25% dilution - implied takeover value of $50M? Yes. 50%? Implied value $100M, don't know. If WC was doing so well, they would be public already.

The owners of WC should realize that 100% ownership of WC means they will still need to flog against a stronger competitor - KNOT - for years to come. But 25% ownership of the only kid on the block could mean much more rapid returns.

Here's some stats on Wedding Channel.
110 employees
Investors include some well known names: Amazon, Federated, Goldman Sachs, Kleiner Perkins (of Google fame)
$46.5M invested in the company to date, last in 2000 (makes a $50M buyout less likely).

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To: Tom Caruthers who wrote (88)8/29/2005 11:23:13 AM
From: Glenn Petersen
   of 133
 
Target may have an interest in KNOT:

Internet Mergers: Who's Next?

As the Web matures, the pace of deals is picking up again, spurred by reasonable price tags on some of the smaller outfits


AUGUST 29, 2005

NEWS ANALYSIS
By Steve Rosenbush

Deal-making has returned to the Internet sector with an intensity not seen in years. Web companies have shaken off the stigma associated with the Nasdaq crash of 2000 and are attracting big buyers from both the on- and off-line worlds. Advertisement

In the past year, News Corp. (NWS ) has announced plans to buy Intermix (MIX ), parent of social-networking site Myspace.com, for $580 million in cash. New York Times Co. (NYT ) purchased search site About.com for $410 million in cash. And Dow Jones (DJ ) bought news site Marketwatch.com for $519 million in cash.

But the acquisitions may have only just begun. One media executive says investment bankers are making the rounds with a list of potential targets that includes a dozen or more Internet companies.

BIG FISH SNAPPING. One possibility: Theknot.com, (KNOT ), a wedding planning site, which is on the block and has held talks with a number of potential suitors, BusinessWeek Online has learned. The leading potential buyer is retailer Target (TGT ), according to one company insider. While no one knows for sure whether they will combine, the companies have had a business partnership since April, cooperating on a bridal registry service. Both declined comment for this story.

Such a deal would follow a recent pattern of large, traditionally brick-and-mortar companies snatching up small and medium-sized Internet outfits. Of course, Web giants like Yahoo! (YHOO ) and Google (GOOG ), with market caps of $48 billion and $80 billion, respectively, would cost far too much to acquire -- but other, smaller candidates abound.

Theknot.com, for one, has existed since the 1990s and posts a net profit. But it's a relative bargain, with a market cap of $230 million -- a drop in the bucket compared with Target, worth nearly $50 billion.

THE PRICE IS RIGHT. "There has been a real bifurcation of value among Internet companies. The big ones are out of reach, and some of the smaller ones look cheap. That tends to drive activity," says D. Jonathan Merriman, CEO of investment bank Merriman Curhan Ford. While the bank has worked with Theknot.com in the past, Merriman said he had no knowledge of the company's immediate plans and declined to comment on whether it was on the block.

The hottest targets tend to have valuations well under $1 billion. Although it's known that news site CNET (CNET ) is up for sale, with a valuation of $1.9 billion, it has had little luck finding a buyer. The same holds true for gaming site IGN (see BW Online, 8/22/05, "IGN Entertainment: Where the Boys Are"). The privately held company is looking for a sales prices of close to $1 billion. With no takers in sight, it may head for an IPO.

But the price of many well-regarded sites is just right. With a valuation of $440 million, the women's-oriented media site ivillage.com will likely find a buyer, investment bankers say. One possible outcome: a merger with rival Lifetime Entertainment, a venture of Disney (DIS ) and Hearst.

LESS STIGMA. Industry watchers consider privately held movie-listing service Fandango.com a logical partner for AOL's Moviefone.com. "But the buyers are almost never who you expect them to be," cautions Jack Flanagan, senior vice-president at Internet researcher comScore Networks. "They tend to come out of the blue, like New York Times and About.com."

The current round of M&A activity dates back all the way to October, 2003, when Time Warner's AOL (TWX ) said it would buy Advertising.com for $435 million. The deal signaled that Time Warner had recovered its equilibrium after combining with AOL in a merger sometimes derided as the worst of all time.

The AOL-Advertising.com deal anticipated a huge runup in the online ad business. And a clear trend has emerged: The Web is drawing advertising dollars from traditional media. Global online-advertising revenue is expected to rise nearly 40% this year, to $13 billion, from $9.6 billion in 2004, according to Ken Marlin, managing partner of Marlin & Associates, an investment bank and adviser to media companies. That equals more than five times the pace of growth in most traditional categories.

REGARD WITH SUSPICION. Global growth is driving Internet M&A, too. China ranks as particularly important. The IPO of China-based search company Baidu.com (BIDU ) earlier in August drew attention to the sector (see BW Online, 8/22/05, "There's More Where Baidu Came From ").

Yahoo has made an investment in China's Alibaba.com. "We have held Chinese Internet companies for a long time. They are an important source of future growth," says Ryan Jacob, CEO of the Jacob Internet Fund, which has $70 million invested in Internet companies.

Jacob regards China's Sohu.com as a likely target because of its search technology. And he considers its price reasonable. From a strategic point of view, he likes instant-messaging site Tencent.com. He says an IM deal won't arouse the ire of regulators in the Middle Kingdom, who tend to regard with suspicion Western-owned news and media ventures. And IM can be used as a platform for all sorts of services that generate ad revenue.

<snip>

us.rd.yahoo.com*http://yahoo.businessweek.com/bwdaily/dnflash/aug2005/nf20050829_4334_db016.htm

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To: Glenn Petersen who wrote (89)8/30/2005 12:57:52 AM
From: Tom Caruthers
   of 133
 
I saw that. The share price seemed to react favorably but then closed negative for the day. We may see some more churn in this range. It frankly surprised me that KNOT was looking for a suitor.

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To: Tom Caruthers who wrote (90)9/14/2005 6:59:05 PM
From: Glenn Petersen
   of 133
 
According to a poster on Yahoo, David Liu, the CEO of KNOT, was going to make an appearance on CNBC late this afternoon. That may explain today's pop.

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To: Glenn Petersen who wrote (91)9/14/2005 10:06:22 PM
From: Tom Caruthers
   of 133
 
Hi Glenn, there is a rumor that Target is looking at KNOT as a possible acquisition. KNOT has been shopping around for a suitor.

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To: Glenn Petersen who wrote (91)10/30/2005 1:03:46 AM
From: Tom Caruthers
   of 133
 
Glenn,

I was a little surprised how sharply the stock jumped to $14 (though I was not complaining) and then disappointed that the stock fell back to support. Hopefully it will hold here going into earnings. Are you still holding KNOT?

Tom

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To: Tom Caruthers who wrote (93)11/1/2005 2:07:37 PM
From: Glenn Petersen
   of 133
 
Tom,

I'm still holding. The price got a bit ahead of itself a couple of weeks ago and fell back when the company got hit by a downgrade. It is bouncing back nicely.

Glenn

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To: Tom Caruthers who wrote (93)1/18/2006 4:46:20 PM
From: Glenn Petersen
   of 133
 
This looks like the prelude for a negotiated settlement:

Form 8-K for KNOT INC

18-Jan-2006

Other Events

Item 8.01 Other Events

On January 17, 2006, a stay was entered in the litigation between The Knot, Inc. and WeddingChannel.com, Inc. for a period of not less than 60 days, upon the joint request of the parties.

biz.yahoo.com

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To: Glenn Petersen who wrote (95)1/18/2006 4:48:16 PM
From: Tom Caruthers
   of 133
 
I think you may be right. Good find

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To: Tom Caruthers who wrote (96)1/19/2006 10:40:23 PM
From: Glenn Petersen
   of 133
 
The market liked the news. Based on the expectation of a settlement, an analyst upgraded the shares and put out a target price of $17.

Knot Shares Leap on Potential Settlement

Thursday January 19, 3:57 pm ET

Investors Take Leap on Knot Shares After Analyst Says WeddingChannel Settlement Likely

NEW YORK (AP) -- Investors took a leap on wedding media company Knot Inc. Thursday, sending its shares up 19 percent after an analyst said Knot is likely to settle a lawsuit filed by rival WeddingChannel.com Inc.

Knot shares, which more than doubled in price last year, gained $2.25, or 19 percent, to $14.06 in afternoon trading on the Nasdaq. Over the past 52 weeks, Knot's shares have traded between $4.98 and $14.39.

Parham Ghorban, an analyst at Roth Capital Partners, issued a research report earlier Thursday predicting that Knot will probably resolve a patent suit filed by WeddingChannel two years ago. Ghorban cited Knot's announcement late Wednesday that both companies have asked to postpone court proceedings in the case for at least 60 days.

WeddingChannel, whose site carries news, advice and other wedding-related services, filed a lawsuit in the U.S. District Court in Manhattan against Knot in September 2003. WeddingChannel claims that Knot is infringing on one of its patents and has said it would seek damages of up to more than $13 million.

Knot said in a regulatory filing late Wednesday that a stay was entered in the case, at the joint request of both companies.

"We believe the stopping of the judicial proceeding one month before the scheduled trial indicates that both parties have agreed to discuss settlement options," Ghorban said.

Ghorban raised his rating on Knot to "Strong Buy" from "Neutral" and increased his price target to $17 from $12. Ghorban also raised his profit expectations for Knot, saying he expects Knot's legal costs to be lower this year.

"A settlement would resolve a two-year feud that has hurt both companies, remove an earnings drag of roughly 10 percent of revenues and highlight the true earnings power of The Knot," Ghorban said.

The analyst now expects Knot to report 2006 earnings of 45 cents per share, up from 31 cents. Wall Street has pegged Knot's 2006 earnings at 34 cents per share, according to Thomson Financial.

biz.yahoo.com

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