MessageMedia Stock Delisting Not Expected to Affect DoubleClick Deal

DoubleClick Inc.'s acquisition of MessageMedia Inc. is not expected to be adversely affected by a delisting of MessageMedia from the Nasdaq exchange.

MessageMedia, a permission-based e-mail services provider, said last week that it was subject to delisting by the exchange because its shares failed to maintain a minimum trading level of $1 for at least 30 days. The company, which received notice of the delisting on June 5, said it plans to appeal the ruling.

DoubleClick spokeswoman Jennifer Blum said yesterday her company was aware that MessageMedia could be delisted from the Nasdaq. But, she noted, a delisting is not expected to affect the price of the $41 million stock acquisition.

DoubleClick on June 1 announced its intention to acquire MessageMedia.

“We knew about this possibility before we went into the deal,” she said. “But it's a fixed-ratio deal, and the price is only affected if our stock price moves.”

However, MessageMedia Inc. is liable for a $1.65 million termination fee if its proposed acquisition does not go through, according to a recent filing with the Securities and Exchange Commission.

MessageMedia must pay the termination fee if its proposed acquisition by DoubleClick is canceled because MessageMedia's board of directors withdraws or modifies its recommendation of the DoubleClick deal; recommends a competing offer; or accepts a superior proposal, the SEC filing noted.

This is not the first time DoubleClick has written such a provision into an acquisition proposal. When its proposed acquisition of NetCreations Inc. collapsed in late December, NetCreations paid DoubleClick an $8.6 million termination fee. NetCreations also paid certain expenses associated with the failed agreement, to the tune of $850,000 to $900,000.

DoubleClick announced its intention to acquire NetCreations in October 2000 for about $191 million in stock. The deal fell through, however, when NetCreations accepted a higher bid from SEAT Pagine Gialle, publisher of the Italian Yellow Pages and an Internet service provider, for $7 per share in cash.

DoubleClick's recent SEC filing notes that either DoubleClick or MessageMedia may terminate the proposed acquisition if it is not closed by Oct. 31.

Under the agreement, DoubleClick plans to issue 0.0436 of a share of its common stock for every share of MessageMedia stock. Based on the 10-day average closing price of DoubleClick's stock May 31, the exchange ratio represents a per-share price of 60 cents, or a 42 percent premium above MessageMedia's stock price.

The deal is subject to the approval of U.S. antitrust regulators and MessageMedia's shareholders.

At least one analyst was surprised by DoubleClick's latest acquisition announcement, which follows DoubleClick's acquisition of FloNetwork in February.

Safa Rashtchy, an analyst at U.S. Bancorp Piper Jaffray, said yesterday that the MessageMedia acquisition probably is more for MessageMedia's client base than for its technology.

“It seems unlikely that the [MessageMedia] acquisition was for a technology, as [DoubleClick] has yet to integrate Flo's system with DartMail, both relatively robust platforms for their respective applications,” he said. “Although the purchase price is small, it seems to be more for MessageMedia's customer base, which suggests that DoubleClick may be having a harder time than anticipated in gaining market share.”

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