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.