As the years passed, Best Blogs Ever, Inc. (BBE) continued to grow. We added more blogs resulting in more revenue and income. Our subscriber base grew at a rate of 10% per year and in our last year of operations, our revenues topped $3,000,000 and our earned income exceeded $1,500,000. We had increased our dividend each year, and we had every indication that our shareholders were very happy with their investment. Our success had not gone unnoticed in the blogosphere.
We received a letter from one of the largest internet companies, Gobble Corporation, asking if we had any interest in merging with them. Gobble was a publicly traded company and had a history of acquiring small internet companies. They have a blogging division and thought that BBE would be a nice fit. Our Board authorized Alice, our President, to explore the concept with them. After several meetings, she presented their proposal of $45 per share of common stock to the Board. Mary Jo, our Chief Financial Officer, had analyzed the numbers and reported that the offer, although seemingly generous, was actually a low ball offer. We shared this information with our shareholders, and the majority of them indicated that we should terminate the discussions. BBE would remain independent. Several of the shareholders, however, had wanted to continue negotiations with the goal of getting a higher number.
When we told Gobble that we did not want to merge with them, they indicated that they were not going to drop the matter. A few weeks later each of our shareholders received a letter offering to buy their shares. The price offered was $50 per share, a little over10% more than Gobble had initially offered to pay in their talks with Alice. This type of direct offer to shareholders is called a tender offer. Gobble offered to pay $50 per share to each shareholder if a majority of the shareholders accepted the tender offer by a certain date. The offer was conditioned on Gobble acquiring enough shares in BBE to elect their own people to the Board of Directors and, in effect, gain control of the company. Their people on the Board would then vote to merge BBE with Gobble. As the date for acceptance of their offer neared, each side strongly lobbied the shareholders regarding Gobble's tender offer.
After the expiration of the tender offer date, we learned that only Venture Funds, Inc. (VFI) had accepted the offer. You may remember that VFI is the venture fund which made the $70,000 investment in BBE in its early years. They had paid $2.50 per share for 4,000 shares of common stock ($10,000) and $60,000 for 600 shares of $100 par value cumulative, convertible preferred stock. VFI would have had a huge profit on its common shares and continued to hold its preferred shares with its 2% annual dividend. Here is a link to the earlier blog describing VFI's investment.
Since it had not been able to gain control of our company, we assumed this would be the end of Gobble's attempt to acquire BBE. We were very surprised when Daniel, one of the VFI representatives who worked with us, reported that VFI had agreed to sell Gobble not only their common shares, but also their preferred shares.
We will pick up from here in the next blog.
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