GUS goes on $246m US shopping spree
Tuesday 15 April 1997
GUS, headed by Lord Wolfson, is paying $246m (pounds 152m) for Direct Marketing Technology, an Illinois-based provider of direct marketing services to the US mail order catalogue industry.
The deal follows the pounds 1bn acquisition of Experian, another US database group in November, GUS' first significant deal in 30 years.
Eric Barnes, deputy chairman of GUS, said he did not envisage further acquisitions in this sector in the foreseeable future hinting instead that something in direct mail order was more likely. However, he added that GUS was "not looking at anything at the moment".
The Direct Technology deal represents another significant step for GUS as it seeks to establish itself as a global force in the rapidly growing market of database services. As the huge success of supermarket loyalty cards has demonstrated in the UK, companies which successfully build detailed profiles of their customers can use the information to target promotions more effectively while growing sales and increasing loyalty.
Direct Tech specialises in database marketing, list processing, and analytical services. It manages more than 200 client databases. Last year it targeted 10 billion pieces of advertising mail, representing 13 per cent of all advertising mail distributed in the US.
Mr Barnes said the Direct Tech business would complement Experian as it served the catalogue industry while Experian's strength was in financial services such as credit scoring.
Though GUS denies they are "big brother" operations, companies such as CCN, its UK information services company, and Experian have huge databases of customer information such as credit worthiness and spending habits and bad debt records.
GUS is paying $222.5m for the equity of Direct Tech as well as repaying its debts of $23.7m. Depending on its performance between now and 2001 GUS could make further cash payments of $52.5m.
Mr Barnes said the deal formed part of the GUS strategy of building up an information services business in the US to complement its CCN division in the UK. He said global clients were increasingly seeking a "one-stop shop" for their database marketing needs.
Direct Tech employs 570 and last year it recorded profits of $15m on sales of $65m.
GUS said that the two founders of Direct Tech, Tom Newkirk and Scot Thomas, would remain. Some cost reductions might come from merging the marketing division with Experian.
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