PlanetOut to be de-listed from exchange

by Matthew S. Bajko
m.bajko@ebar.com

PlanetOut, the once venerable LGBT media company and the first to be publicly traded, will be de-listed from NASDAQ due to its merger with Here Media.

The San Francisco-based company had traded under the ticker symbol LGBT since its debut in October 2004. It marked the first time a business focused exclusively on the LGBT market was sold and bought on a major stock exchange.

As part of a $4.7 million merger deal it has signed with L.A.-based Here Networks LLC and Regent Entertainment Media, PlanetOut is set to become a subsidiary of the newly named Here Media. The companies announced the deal in early January.

The new company will be majority owned by Regent Entertainment CEO Stephen Jarchow, who will serve as chairman of the combined company, and Here Networks CEO Paul Colichman, who will serve as CEO of the new company. During the first year, both men will receive $1 in salary.

But the two executives will control the company through ownership of 80 percent of its preferred shares. PlanetOut shareholders will receive one common share and one special share in the new company for each share of PlanetOut they own.

"The company is effectively facing de-listing. It doesn't qualify for listing on a stock exchange at the moment because of this reduction in value," said Jarchow during a conference call with investors and reporters Monday, January 26.

The new company, however, will remain a publicly traded and publicly reported company.
"It will be traded over the counter. You will have the ability to buy and sell stock," said Jarchow on the call.

Due to the merger, PlanetOut laid off 33 percent of its staff this month, and the new executives said more layoffs are possible as it reduces duplicative positions.

"I can't say there won't be more staff reductions. There may be other ways to reduce costs. There may also be ways to redeploy people within the company," said Colichman, who also did not rule out purchasing other companies to add to Here Media's ever-expanding empire. "We will make more acquisitions when it makes sense."

The executives said they hope to be "cash profitable" by the end of the year and have Here Media re-listed on the stock exchange as soon as possible. The deal, which still must be finalized by PlanetOut's stockholders and approved by federal regulators, will be a benefit to shareholders, argued Jarchow.

Current PlanetOut CEO Karen Magee agreed, saying on the call that, "Given the evolving media landscape, the proposed merger is absolutely the right move. It is a win for our stockholders and a win for the LGBT community."

Should the company be sold or liquidated during the next four years, the first $4 per share will go to each of the PlanetOut shareholders' share of stock, said Jarchow.

"It leaves you with a much stronger company," he said. "It is designed not only to protect you but give you a confidence level that we mean business on this. We plan to work diligently and hard to make this a success."

Here Networks is primarily made up of the cable subscription service Here TV, which offers original LGBT movies and series on a pay-per-view basis, while Regent is its publishing arm. Regent had already scooped up PlanetOut's publishing business – it once held title to national LGBT publications the Advocate, Out , and HIVPlus – on the cheap last year for $6 million.

Prior to the sale of its magazines, PlanetOut offloaded its cruise ship business, RSVP Vacations, in late December 2007 to competitor Atlantis Events Inc. for $2.1 million as it teetered on collapse due to its ballooning debt load. By the end of 2008 the company's accumulated debt had reached $100 million.

The downsizing of the company was meant to help it focus on its core online brands Planetout.com and Gay.com. But the rollout last fall of a redesigned Gay.com was marred by technical glitches.
In the eyes of the Here Media execs, the Gay.com site is still under-used. They intend to rework the Web site to create a gay version of Hulu, the Web site that carries advertiser-supported entertainment content viewers can watch for free.

"We have always been producers and content developers, we are not a tech company," said Colichman. "We are a content company that uses many, many technologies."

Through the merger, Colichman said advertisers would be able to better reach LGBT eyeballs through Here Media's vast array of television channels, publications and Web sites. It will also better serve viewers, particularly Web and tech savvy LGBT consumers, who want to watch movies and TV shows on their computers and mobile devices without having to also watch numerous commercials.

"Let's move to where the audience is going and be part of the next wave of success as opposed to crying about how things are changing," he said. "The exciting aspect and main reason we want to do this particular venture is it is the next real step in the integration of social networks with content."
Colichman envisions LGBT people chatting online through Gay.com while at the same time watching Here Media's shows and movies, that they then can blog about in the chat rooms or e-mail clips to friends.

"The stage is set to allow this powerful and adverse tool to do its job. To do it, you need professional content produced by our own community to give it full value and life," he said. "We are literally tapping into today's Zeitgeist with what is happening with today's media."

01/29/2009
http://www.ebar.com/news/article.php?sec=news&article=3675

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