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Varsity Group Inc. (VSTY) Enters Into Definitive Merger Agreement for $0.20 per Share

Varsity Group Inc. announced February 25th it has entered into a merger agreement with subsidiary of Follett Corporation, the nation’s largest provider of library materials and technology to K-12 schools, the leading operator of college bookstores, and major distributor of textbooks at all levels of education. Proceeding after the merger agreement, Follett will acquire all outstanding shares of Varsity Group for $0.20 per share in cash and is expected to commence in the next two weeks.

The tender offer is subject to a number of closing conditions and is currently expected to close in the second quarter of 2008. This has been unanimously approved by the Board of Directors of Varsity Group and has recommended that Varsity Group stockholders accept the offer and tender their shares of Varsity Group pursuant to the offer.

Eric J. Kuhn, Chairman and co-founder of Varsity Group commented, “Completing this transaction will significantly enhance Varsity Group’s ability to support our school customers and grow the business. By combining Varsity Group’s virtual bookstore expertise with Follett’s distribution capabilities and understanding of the K-12 marketplace, our customers will receive superior customer service and fulfillment.”

Christopher D. Traut, President and Chief Executive Officer of Follett Corporation said, “As a pioneer in the online sales of textbooks, Varsity Group has established a solid virtual bookstore presence that will help us accelerate Follett’s growth in this market. In addition to our extensive involvement in serving K-12 schools and school districts, Follett manages the ecommerce needs for more than 900 colleges and universities across the country. We intend to leverage al of this expertise to enhance Varsity Group’s level of value and service to customers.”

An affiliate of Follett purchased Bank of America’s interest in Varsity Group’s line of credit and currently there is approximately $1.8 million of advances outstanding under the line of credit. In connection with this funding arrangement, Varsity Group has granted a warrant to an affiliate of Follett to acquire shares of Varsity Group common stock equal to the total of advances made under the line of credit divided by the exercise price of $0.20 per share and subject to adjustment.

All Directors of Varsity Group and certain stockholders, who in the aggregate hold approximately 20% of the outstanding shares, have agreed to support the merger and tender their shares in the tender offer. If the merger agreement is terminated under certain circumstances, Varsity Group will be obligated to pay a termination fee and expenses to the Follett subsidiary.

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