DoubleClick, NetGravity Deliver a Double Whammy

In a strategically timed set of announcements, DoubleClick Inc. (Nasdaq: DCLK) and NetGravity Inc. (Nasdaq: NETG) said Tuesday they plan to merge, just as each prepares to report record second quarter revenues.

It was unclear how Wall Street would view the collective announcements in the long term, however. DoubleClick stock dropped $3.25 per share in the first hour of trading, while NetGravity shares dropped $2.875 each, but the market as a whole also opened down due to international market concerns.

The deal will put two of the most active Internet advertising firms together, combining DoubleClick’s focus on comprehensive online ad campaigns with NetGravity’s interactive advertising and direct marketing operations. The $530 million (US$) merger including the value of DoubleClick’s previously announced merger with Abacus Direct, putting the combined value of all three companies at about $5.6 billion based on July 12’s closing stock prices.

NetGravity stock holders will receive 0.28 shares of DoubleClick for each NetGravity share they own. The ratio values NetGravity’s shares at $26.32 each, well below Friday’s $29.63 closing price and down from Monday’s $27.50 price. But DoubleClick argues the valuation is about 26 percent more than NetGravity’s average price over the last 30 days. DoubleClick shares closed Friday at $102.94 and Monday at $94 each. The transaction is expected to be completed in October.

Broader Reach

Noting the companies each have strong relationships with major Internet publishers to the deal, DoubleClick CEO Kevin O’Connor said their combination will create “the broadest possible infrastructure for Internet advertising.” DoubleClick brings 28 offices on four continents to the partnership, while NetGravity says it has more than 360 customers, including several major online names such as IBM, Time Inc. New Media, E*Trade and Financial Times Group.

They also bring lively balance sheets. DoubleClick posted a record $44 million in revenues for the second quarter ended June 30, up 154 percent from the year earlier period and a 41 percent improvement on this year’s first quarter revenues. NetGravity’s second quarter 1999 revenues were also a record. The company took in $5.6 million, a 143 percent increase over the $2.3 million in the second quarter of 1998. The revenues grew 22 percent from the first quarter of this year. Neither company has said how their revenue increases affected their bottom lines.

DoubleClick plans to release full earnings on July 19th after the closing bell, while NetGravity plans to report its figures July 21st.

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