Online advertiser DoubleClick (Nasdaq: DCLK) doubled investors pleasure Tuesday as it pre-announced record revenues for the second quarter and revealed plans to acquire competitor NetGravity (Nasdaq: NETG) in a reasonably-priced stock swap valued at about $530 million.
The announcement is double-trouble for some NetGravity (Nasdaq: NETG) investors though - the per-share price of the deal, $26.32, based on DoubleClick's closing price Monday, is below actually less than NetGravity's Monday closing price of $27.50. The deal, however, does offer a 26 percent premium over NetGravity's 30-day average trading price. The deal overshadowed better-than-expected second quarter results
"Shareholders may not approve the deal at such a low price," said Tara Long of C.E. Unterberg, Towbin.
NetGravity shares were down 1 21/32 to 25 27/32 Tuesday, when the report of a second quarter record revenue of $5.6 million, up from $2.3 million reported last year, might have otherwise given them a boost. The San Mateo, California-based company will release its complete second quarter results on July 21, losses are expected to be at 14 cents a share, compared to last year's 30 cent a share loss.
Doubleclick shares were up 1 1/2 to 95 1/2 Tuesday morning and analysts said the stock would be more up if the broader markets weren't weak. DoubleClick reported revenue of $44 million for the direct marketing second quarter of 1999, a 154 percent increase over the $17.3 million for the same time last year. The company will make full reports on July 19. First Call expects losses to be 13 cents a share, compared to a 14-cent loss last year.
The deal is strategic because it "provides DoubleClick with an in to NetGravity's customer base of 360 companies," Long said. Many of which, such as CNN Interactive, Knight-Ridder (NYSE: KRI) and Ogilvy & Mather, are very attractive. It also creates a dominant player, joining two powerhouses in a move that will make it tough for competitors to edge in. "Combined, they will serve 9 of the top 25 sites," Long said
This leaves DoubleClick with a lot on their plate. The recent acquisition with Abacus Direct Corp. (Nasdaq: ABDR) gave DoubleClick the world's largest warehouse of buying patterns.
"NetGravity's strengths combined with DoubleClick's technology infrastructure and Abacus Direct's data will create a company uniquely positioned to be the overall leader in targeted advertising,'' DoubleClick's chief executive officer Kevin O'Connor, said in a release. O'Connor was among the big winners on ZDII's CEO Wealthmeter Tuesday.
Including the value of the previously announced merger with Abacus Direct, the market value of the combined companies is $5.6 billion according to the July 12 closing price. DoubleClick will issue 0.28 shares of DoubleClick common stock for each share of NetGravity common stock.
The merger, subject to NetGravity shareholder approval, is expected to be completed early in the fourth quarter of 1999.