Demand Media plans to separate business into 2 companies: content creation and domain services

Demand Media today announced that its board of directors has authorized a plan to explore separating its business into two independent, publicly-traded companies:

• A pure-play media company with a powerful outsourced content creation platform that organically grows its audience, leading web properties that reach over 100 million monthly unique visitors, and an integrated monetization platform that incorporates branded, network and mobile revenue streams; and
• A pure-play domain services company that would be the only end-to-end provider offering registry services, expansive wholesale and retail distribution, and comprehensive aftermarket services.

Demand Media, Inc. is an American content and social-media company that operates online brands such as eHow, and Cracked, and is known for creating online content through its Demand Media Studios division. The company also provides social-media platforms to existing large company websites and distributes content bundled with social-media tools to outlets around the web. The company also owns eNom, the world’s second-largest domain registrar. On January 7, 2013, Demand Media announced the acquisition of domain name registrar Name.com. Demand Media claims that every month more than 100 million people come to them from across the globe, and 1 in 3 Americans who are online are visiting their sites.

Here is the press release:

SANTA MONICA, Calif.–(BUSINESS WIRE)–Feb. 19, 2013– Demand Media® (NYSE: DMD) today announced that its board of directors has authorized a plan to explore separating its business into two independent, publicly-traded companies:

• A pure-play media company with a powerful outsourced content creation platform that organically grows its audience, leading web properties that reach over 100 million monthly unique visitors, and an integrated monetization platform that incorporates branded, network and mobile revenue streams; and
• A pure-play domain services company that would be the only end-to-end provider offering registry services, expansive wholesale and retail distribution, and comprehensive aftermarket services.

“Both businesses have grown to become leaders in their respective markets, and we now want to provide additional operational and strategic flexibility to drive sustainable growth,” said Richard Rosenblatt, Chairman and CEO, Demand Media. “We believe a separation will position each business to better pursue its specific strategic priorities and vision, as well as improve transparency for investors and enable the capital markets to better assess each company’s value, performance and potential.”

Rosenblatt added: “We intend to appropriately capitalize both companies to pursue their distinct growth opportunities, such as the upcoming launch of new generic Top Level Domains that is a transformative event for our domain services business, as well as further diversifying our content offerings in our media business.”

Demand Media anticipates that the potential transaction will be in the form of a tax-free distribution to U.S. stockholders of new publicly traded stock in the domain services company. The Company expects that the completion of this transaction could take place in the next nine to twelve months. Executing this transaction requires further work on structure, management, governance, and other significant matters. Over the next several months, Demand Media’s management, working with outside advisers, intends to develop detailed plans for the board’s further consideration and approval.

This transaction is subject to a number of conditions, including final approval of the transaction by Demand Media’s board, favorable tax rulings and opinions regarding the tax-free nature of the transaction to Demand Media and to its stockholders, further due diligence as appropriate, and the effectiveness of required filings with the Securities and Exchange Commission (“SEC”). There can be no assurance that the separation of Demand Media’s business as described in this announcement will occur.

About Demand Media

Demand Media, Inc. (NYSE: DMD) is a leading digital media and domain services company that informs and entertains one of the internet’s largest audiences, helps advertisers find innovative ways to engage with their customers and enables publishers, individuals and businesses to expand their online presence. Headquartered in Santa Monica, CA, Demand Media has offices in North America, South America and Europe. For more information about Demand Media, please visit www.demandmedia.com