PointCast founder Chris Hassett has formed an investment team to explore a possible bid to buy the company he created.
Hassett and his team plan to review the company's finances and conduct other forms of due diligence starting this week, the founder told CNET's News.com. Details regarding the investment team are expected to be announced as early as this week, he said.
Hassett, who was ousted from his role as chief executive in June 1997, still owns a stake in the company.
The investment group plans to decide in the next two weeks whether to proceed with an offer to take a controlling stake in PointCast. Hassett said the investment group, which includes Wall Street firms and corporations, is considering an offer of more than $15 million to take control of the company.
Hassett's group is one of many potential buyers that are holding talks with
PointCast, said Wendy McCarthy, a PointCast spokeswoman.
Hassett's plans were first reported by CNN. Terms of the deal and the names of potential investors were not disclosed.
Hassett's plans are the latest of many turns for the struggling company that pioneered push technology. Last week, PointCast cut a third of its workforce after buyout negotiations with a consortium of telecommunications firms fell through.
And last month, David Dorman--who had led discussions with the consortium-- announced that he was resigning as PointCast's chief executive to head a
joint venture with AT&T and British Telecom.
"I look at this potential investment as a way to take a great company
forward and get it back on track," Hassett said. "When Dave left, it had an
impact on the strategic direction of the company. The company needs a
well-defined focus and a management team to execute on that direction."
PointCast needs to concentrate on delivering its service through the Web on any browser, Hassett said. At present, the company's 700 information sources and industry information are available only by using specific PointCast software.
He cautioned, however, that his thoughts are preliminary, as he has not taken an in-depth look at the company for a couple years.
"PointCast has always been thought of as a pioneer of push, but the company
is an asset for media companies," he said. "If we invest in the company,
we'd look to bring in additional management from a publishing background
to get the company on track. I've already talked to some media [executives], and they're ready to come in pretty quickly."
PointCast executives have already been informed of Hassett's interests, and
he noted that his moves are not part of a hostile effort to takeover.
He does, of course, have opinions about how the company should be run.
Although Hassett agrees with Phil Koen's decision to cut PointCast's workforce, he noted that chief executive Koen's background is in finance, not publishing. Koen, who succeeded Dorman as CEO, had served as chief financial officer.
Hassett said he does not plan to take a management role at the company if his investment team moves forward with a bid. He said he views his efforts as strictly an investment.
"PrizePoint keeps me pretty busy
and things are going well there. We have over 100,000 subscribers," Hassett said of his new business venture.
Last January, Hassett launched PrizePoint Entertainment, a site that offers
games that reward players with points that can be used for small cash awards to vacations and vehicles. He said that, should the investment team gain majority control of PointCast, there are no plans to combine it with PrizePoint.
After the telecom deal failed, PointCast said it was planning to embark on a refocused business strategy and wants to raise $15 million to $20 million through either an investment or buyout of the company, said a company spokeswoman. Hassett, however, would apparently stand to lose if such a deal does not fetch more than $75 million.
The founder holds less than a 10 percent stake in PointCast on a fully diluted basis, sources said. But including the holdings of other family members, the stake totals more than 20 percent of the common shares.
The Hassetts, however, hold no preferred shares. That means if PointCast
were sold at a price that would only cover the investment of the preferred
shareholders, there would be nothing left for the common shareholders,
Preferred shareholders, as a group, have invested $75 million into
PointCast and sources said it's unlikely the company will be able to raise
that level in an investment or sale of the company.
Questions have arisen as to whether Hassett will be able to assemble a team of
investors. Hassett launched PrizePoint Entertainment in January
with the financial backing of two affiliated PointCast investors: Encompass
Ventures and Trans CosmosUSA.
But one source said: "He does not have a good relationship with the other
PointCast investors, and it's unlikely any of the Silicon Valley venture
firms will back him."
The company founder countered that his relationships with PointCast
investors and employees are going "reasonably well." He added that
"I also have a strong relationship with Benchmark Capital and Mohr Davidow Ventures," both PointCast investors and board seat holders, "because I'm an investor...in some of their funds."
PointCast has seen its valuation drop sharply. More than two years ago, the company discussed a $450 million buyout by News Corporation, but a deal was never
made because some investors believed that the company could get a higher price, sources said.
Friction later began to develop between Hassett and board members over
management of the company, and the founder was ousted from his role as chief executive, sources said. The company hired telco executive David Dorman in fall 1997 and plans were put in place to take the company public.
In July, however, PointCast withdrew its plans for an initial public offering, which it had hoped would raise $52 million, saying it wanted to explore discussions with potential strategic partners. PointCast had approached such media companies as NBC, offering to give it roughly a sixth of the company for $20 million, indicating a total PointCast value of about $120 million.
Eventually, PointCast was able to receive roughly $16 million in interim debt financing from the telecom consortium, which included BellSouth, US West, Bell Canada, and Microsoft. A letter of intent was signed to negotiate toward a buyout of the company, with the goal of taking it public.
Hassett, though no longer an officer or director of the company, was
allowed to be involved in these discussions because of the size of
his family's stake, sources said. PointCast, in essence, did not want to have an uninformed Hassett oppose the deal at the very end, said sources, who noted that the former founder had appeared satisfied with the deal that had been proposed.
But the talks collapsed shortly after BellSouth said it wanted SBC or "="" rel="nofollow" class="c-regularLink" target="_blank">Bell Atlantic to join the consortium. BellSouth's demands came after Microsoft pulled out of the consortium in mid-February.