Web.com Files to Rescind WebSource Media Acquisition.
2006-06-22, HostMan.biz
Web.com, Inc. announced today that the company has filed to rescind its recent acquisition of WebSource Media, which was announced approximately a month ago. Among other matters, Web.com recently learned that the Federal Trade Commission (the ``FTC'') filed a sealed action in the United States District Court for the Southern District of Texas against WebSource Media, L.L.C. and its members that alleges unfair and deceptive acts and business practices prior to the acquisition.
Web.com was not named as a defendant in the FTC action and had no prior knowledge of any investigation or alleged unfair and deceptive practices at WebSource Media. The FTC's sealed case uncovered material facts previously undisclosed by WebSource Media to Web.com, which Web.com believes constitute material breaches of the agreement pursuant to which the company acquired WebSource Media. The court has appointed a temporary receiver for WebSource Media and Web.com has been appointed to manage the business operations of WebSource Media as an agent of the receiver.
Web.com structured the WebSource Media acquisition as an earn-out in which the owners of WebSource Media would earn payments based on reaching revenue and profitability goals. The majority of these payments were scheduled to occur only if the aforementioned goals were achieved over a three-year period. Web.com has incurred approximately $3.5 - $4.0 million of expenses related to this acquisition which include debt payments, liabilities, operating costs, initial earn-out and closing costs. The company expects to record a charge of that amount during the second quarter of 2006. Web.com will use all appropriate legal means to recoup these funds and recover damages.
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