Fashionmall.com Rejects Buyout Bid

Fashionmall.com (Nasdaq: FASH) and direct marketing and advertising firm GenesisIntermedia.com (Nasdaq: GENI) announced Wednesday that they have ended merger talks after the e-tailer's board of directors rejected a previously proposed buyout bid from Genesis.

Genesis initially pitched its offer at the end of December, saying that it had already acquired a 7 percent stake in the New York City-based company and was prepared to purchase the remainder for US$7 per share in cash and stock.

"Naturally, we're disappointed that our offer was not accepted," said GenesisIntermedia.com chairman and chief executive officer Ramy El-Batrawi. "However, we respect the decision of Fashionmall.com's board of directors and we continue to build and shape our companies, and create shareholder value, in accordance with our business plan."

Both companies also said that they would still consider a strategic alliance.

Thinking Big

Genesis, which owns the Centerlinq shopping loyalty network as well as a range of other consumer businesses, had hoped a Fashionmall acquisition would help create one of the most heavily-trafficked and interactive shopping and advertising ventures on the Net. At the time, Fashionmall said it was not for sale, though its chief executive said management would evaluate Genesis' offer.

Fashionmall, which was established in 1994, operates several portals devoted to the fashion, beauty and lifestyle industry, including its namesake Web site, as well as Boo.com, Outletmall.com and ItsyBits.com.

"The merging of Centerlinq and Fashionmall will create one of the largest networks to serve both the brick-and-mortar world and the Internet," El-Batrawi said in December. "We will also enjoy numerous opportunities to cross-promote Fashionmall partners to Centerlinq members and shoppers in a growing number of malls, and Centerlinq advertisers to Fashionmall users on their home PCs."

The Centerlinq network reaches more than 35,000 consumers through Web access and Internet kiosks in shopping malls.

Fielding Offers

Genesis was not the only company interested in buying out Fashionmall. One day before Genesis delivered its acquisition proposal, the e-tailer received an unsolicited bid for $3.50 per share in cash from Narax, Inc., a Beverly Hills, California-based buyout firm.

Despite the offer from Narax, Fashionmall chief executive officer Benjamin Narasin appeared more receptive to Genesis' bid, saying that Narax did not negotiate with Fashionmall prior to sending a fax outlining its proposition.

Fashion Crisis

Fashionmall has had some trouble reaching the breakeven point. Although it has increased its revenue in recent months, the company has also seen its losses grow.

In its third-quarter earnings report issued in November, the company said it lost $933,000 on $3.68 million in revenue, compared to a loss of $497,000 on $2.6 million in sales during the same period in 1999.

The company's stock, meanwhile, has traded in $2 per share range for most of the year.