Mark Cuban: Mark Cuban joins proxy fight for Register.com

» Kirk - Mark Cuban joins proxy fight for Register.com

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Mark Cuban joins proxy fight

by David ShabelmanWed Jul 6, 6:00 AM ET

Seeking to wrest control of Register.com Inc., shareholder James Mitarotonda has added an all-star to his team in Dallas Mavericks owner Mark Cuban.

Cuban, who owns 13.7% of the New York-based Internet name registration company, has joined a slate of nine candidates proposed by Mitarotonda to run for positions on Register.com's board of directors. Mitarotonda, CEO of New York investment firm Barington Cos. Equity Partners LP and a Register.com board member, last month was rebuffed in an attempt to buy the company for $172 million. His slate of candidates was listed in a regulatory filing made July 1.

A spokeswoman for Register.com said the company is reviewing the validity of Barington's proposed board candidates. The company's annual meeting is scheduled for Sept. 8.

Cuban made his fortune in 1999 after selling streaming media company Broadcast.com Inc. to Yahoo! Inc (Nasdaq:YHOO - news). of Sunnyvale, Calif., for $5.7 billion in stock. He bought the Dallas Mavericks of the National Basketball Association in 2000.

In an e-mail, Cuban declined to discuss his plans for Register.com should the proxy challenge succeed, although Mitarotonda has previously called on the company to sell itself. Cuban did say his stake in Register.com is "strategic" to some of his other investments and that the investment is independent of Mitarotonda's financial interests in the company.

Cuban invests in another domain name registrar, Tucows Inc. of Toronto, and is part of a group of investors that owns NetIdentity, a Boulder, Colo.-based company that provides personalized e-mail service.

Chris Lahiji, president of DailyTrends.com, a Web site that provides stock market information and analysis, said Cuban is unlikely to make a play for Register.com, which has a market capitalization of $189.1 million and an enterprise value of roughly $81 million.

"The guy has $2 billion — it's a drop in the bucket for him," Lahiji said. "But it's great because now people are actually looking at the company. Cuban has quite a following. It's not as large as Peter Lynch or Warren Buffett, but it's a large following."

In the past 60 days, Cuban has bought nearly 2.5 million of the 3.3 million shares of Register.com he owns, according to regulatory filings. Most of his recent purchases were at prices of $7.45 per share and above, including 1.1 million shares purchased on June 30 for $7.70 a share.

Register.com provides Internet domain name registration services for 3 million customers. As of March 31, it had $108 million in cash, or roughly $4.45 a share. The company reported net income of $3.3 million in 2004 on revenue of $100.9 million. In the first quarter, it reported net income of $986,000 on sales of $25.4 million.

On June 10, Mitarotonda offered to buy Register.com for $7.10 a share. Midday the company's stock traded at $7.70.

In a deal, Register.com would fetch $8.50 a share to $9 a share, or $206 million to $218 million, Lahiji said.

Register.com and Mitarotonda have been fencing for years. In January 2003, he offered to buy Register.com for $223 million, but the company rejected the offer, which at the time was only marginally higher than the value of its cash reserves. The investor later announced plans to gain representation on the board.

In June of that year, Mitarotonda and Register.com reached an agreement that ended his proxy fight. The pact called for the company to distribute $120 million to shareholders and install the investor on its board. Mitarotonda also agreed at the time not to pursue control of the company for two years. He did not return calls seeking comment.

-- posted by Kirk