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Valassis

Valassis, the parent company of RedPlum, is getting new owners and a big influx of cash. It announced this morning that it will be acquired by integrated payment solutions and marketing services provider Harland Clarke Holdings Corp. for $1.84 billion. Shareholders will be able to cash out at $34.04 per share, well above yesterday’s close of $28.30, as the company now goes private.

Okay, so that’s all well and good for Valassis and its shareholders. But what’s in it for you?

In the coupon business, Valassis’ RedPlum has long been number-two to SmartSource and its deep-pocketed owner News America, part of the Rupert Murdoch-run conglomerate News Corp. So dominant is SmartSource, that Valassis recently sued for unfair competition, accusing News America of using its muscle to push Valassis aside in the coupon competition.

“Valassis has been getting killed for years in the coupon business,” analyst Ed Atorino of Benchmark Co. told Coupons in the News. “News America is a very tough competitor with a very big checkbook.”

Curiously, in a research note released just last week, BMO Capital Markets analyst Dan Salmon speculated on the possibility of Valassis being acquired – by News America. “We believe it is possible,” he wrote. But such a combination would face considerable challenges, not the least of which is that “it would create a monopoly in free-standing inserts and in-store marketing.” And the fact that the two companies are once again battling each other in court, could indicate that “the long-time rivalry may be too much to bring an acquisition together.”

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So with Valassis being acquired by Harland Clarke Holdings instead, the RedPlum-SmartSource rivalry stands. As we all know, competition is good for consumers. But having one dominant coupon provider and one also-ran, can’t be particularly good for couponers. So new owners could help reinvigorate Valassis and give it a leg up on the competition – which just might result in better offers for all of us.

“This acquisition will leverage each company’s respective best practices and result in significant operating efficiencies to provide even more effective services to our world-class global customer base,” said Chuck Dawson, Chief Executive Officer of Harland Clarke Holdings Corp. in a statement announcing the transaction. “Harland Clarke Holdings is the right owner for Valassis and has the expertise and resources to accelerate our continued evolution and innovation,” added Rob Mason, President and Chief Executive Officer of Valassis.

RedPlum.com is one place that Atorino thinks Harland Clarke Holdings and its strong technological base can help. Valassis was late to the online coupon business that’s now dominated by Coupons.com. Valassis actually ran a printable coupon site back in 1998, the same year that Coupons.com debuted. But while Coupons.com thrived, Valassis shut down its site just a few years later. By the time it got back into the business in 2008 with RedPlum.com, Valassis was playing catchup. Making matters more confusing, Valassis started tinkering with its branding, changing its online coupon site to Save.com/Coupons earlier this year – then abruptly doing an about face and changing it back to RedPlum.com a few months ago.

But ultimately, Atorino believes the deal announced today is not really about coupons at all. “The coupon business is a very small piece of Valassis,” he notes, concluding that the deal “is not going to change much” in that regard. Instead, he believes Harland Clarke Holdings has its eye on Valassis’ direct mail business, which Valassis has been struggling with, and Harland Clarke and its connections could help turn around. As BMO’s Salmon has observed in a series of research notes, “Valassis has transitioned from being a coupon publisher to a direct mail distributor, taking advantage of the secular declines in newspaper circulation to consolidate third-party inserts in its own Shared Mail packages.”

In other words, a more successful direct mail division could eventually accelerate RedPlum’s slow migration from appearing inside newspapers, to appearing directly in your mailbox.

So even after the deal goes through, RedPlum may remain a runner-up to SmartSource in the coupon insert business. But in the end, a stronger runner-up is better for couponers, than no runner-up at all.

2 Comments

  1. Pingback: Coupons.com - Crazy Growth Assumptions Necessary To Justify Valuation - At ... - Seeking Alpha (registration) - Coupon News Alert

  2. Coupons in my mail box would be great-but only if they’re from Mfgrs of products I actually use.
    Lately, RP’s client list has not been very exciting.

    Good Luck Red Plum! looking forward to seeing some good things from you.

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