DoubleClick to acquire MessageMedia for $41 m.

Derek Caney

NEW YORK: Top online advertising company DoubleClick Inc. said on Friday that

it had entered into a deal to buy MessageMedia Inc. for $41 million in stock in

a bid to expand its presence in e-mail marketing. This would mark the second

acquisition DoubleClick is making, in the e-mail-marketing sector after its

purchase of FloNetwork in February.

The deal occurs against the backdrop of a slowing economy and a shrinking

advertising market. A year ago, online advertising companies were high-flying

properties propped up by aggressive spending by dot-com companies, many of which

would be out of business by the end of the year.

E-mail marketing, however, is viewed as having more growth potential, with

its ability to target specific audiences, than banner ads that are displayed on

Web sites. Under the terms of the acquisition, DoubleClick would issue 0.0436 of

a share of its common stock for each share of MessageMedia common stock, the

firms said in a statement.

Based on DoubleClick's 10-day average closing stock price for the period

ended May 31, the exchange ratio represents a per share price of 60 cents, a 42

per cent premium over MessageMedia's 10-day average closing stock price.

DoubleClick boasts over 600 million e-mails per month, while MessageMedia

delivers about 100 million e-mails monthly.

ABN Amro analyst David Doft applauded the deal, noting that MessageMedia's

client base included such companies as Cisco Systems Inc., E*Trade Group Inc.

and Starwood Hotels & Resorts Inc. "Plus, MessageMedia has the

strongest e-mail software product in the market. That was an area that

DoubleClick didn't even compete in," he added.

"MessageMedia was stuck in a position of burning cash," Doft said.

"They didn't have the flexibility to reinvest in the business." The

company had $9.5 million of cash on its first-quarter balance sheet. Much of the

online advertising business is faced with similar challenges, he said. 24/7

Media Inc. recently sold three of its businesses, while in March Engage

Technologies Inc. sold most of the assets of its Web site measurement business.

However, Jefferies & Co analyst Michael Legg expressed concern over the

company's use of stock for the transaction instead of cash. "By using

stock, they're saying that stock is the best currency to use and that preserving

cash is very important for their war chest," he said. "That sends the

message that the stock is fairly valued."

The companies said the transaction, which would be accounted for as a

purchase, was subject to MessageMedia stockholder approval and was expected to

close in the third quarter of 2001.

(C) Reuters Limited 2001.