AQuantive to Buy SBI.Razorfish for $160M

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Online advertising company aQuantive said yesterday that it reached a deal to acquire Web design firm SBI.Razorfish for $160 million in cash and convertible notes.

The deal would join aQuantive's interactive ad agency Avenue A with SBI.Razorfish to form Avenue A/Razorfish, offering clients both online marketing and Web site design services.

"As the media world becomes more and more fragmented, and broadband becomes more and more ubiquitous, the importance of the Web site in the marketing mix will only increase," aQuantive CEO Brian McAndrews said during a conference call.

AQuantive would pay $85 million in cash and $75 million in convertible notes for SBI.Razorfish, a division of SBI Group. SBI.Razorfish had $93 million in net revenue in 2003 and was profitable, the company said.

Acquiring the Web design firm would greatly expand aQuantive's agency business, adding 500 employees and nine U.S. offices. McAndrews said most SBI.Razorfish employees would stay with the company. SBI.Razorfish designs Web sites, microsites and e-commerce tools for 50 clients including Ford Motor Co., Kraft and Microsoft.

McAndrews said Avenue A/Razorfish could close the marketing loop, offering customers both a way to attract customers and compelling content on their Web sites to retain them.

"We think the capabilities are critically important in the long term for this industry and for our clients," he said.

SBI.Razorfish is one of the largest Web design firms, ranked No. 2 in revenue by Advertising Age in its 2003 ranking of the top interactive agencies. The company combines more than a half-dozen interactive agencies that rose and fell with the dot-com boom. Along with Razorfish, which SBI acquired in 2002 in a deal valued at $8.2 million, it includes the assets of formerly independent Web design firms iXL, Scient and Lante.

AQuantive expects the deal to close in late July. Avenue A/Razorfish will have three regional presidents: Bob Lord, an SBI.Razorfish vice president, will run Avenue A/Razorfish East; Clark Kokich, Avenue A's president for Seattle/Chicago, will run Avenue A/Razorfish West; and David Friedman, an SBI.Razorfish executive vice president, will take charge of Avenue A/Razorfish Central.

SBI Group president/CEO Ned Stringham will join aQuantive's board of directors but relinquish any operational role.

AQuantive plans to keep Avenue A/Razorfish separate from its other Web design firm, iFrontier, which specializes in serving the pharmaceutical industry. AQuantive also operates a technology unit with ad server Atlas DMT and performance-based ad network Drive.

AQuantive expects the acquisition to add $41 million to $43 million in revenue. It is expected to decrease net earnings, thanks to non-cash charges.


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