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 user 2005-06-23 at 11:03:00 am Views: 85
  • #11658

    ValueClick makes 2 big buys

    ValueClick, a Westlake Village-based online advertising company, will spend $156 million to acquire two privately held companies in deals that could boost its revenue by nearly 50 percent.

    Both acquisitions were announced June 13. In the larger deal, ValueClick will buy Web Marketing Holdings, a Harrisburg, Penn.-based marketing company that does business under the name Web Clients, for $141 million in cash and stock. ValueClick will also purchase E-Babylon, a Simi Valley-based retailer of toner cartridges and other printer supplies, for $14.7 million in cash. ValueClick expects both deals to close in July.

    Both companies are profitable, ValueClick said in a company statement. In 2004, Web Clients’ revenue was $59 million, and E-Babylon’s was $17 million. ValueClick reported revenue of $169 million.

    Web Clients and E-Babylon are the fifth and sixth acquisitions ValueClick has made in the past two years, according to the company’s filings with the U.S. Securities and Exchange Commission. In 2003, ValueClick bought Commission Junction, a Santa Barbara Internet advertising company.

    “It’s a coincidence that we ended up signing these agreements at about the same time, but we’ve been a consolidator in the industry, and mergers and acquisitions will continue to be a part of what we do,” said Gary Fuges, ValueClick’s director of corporate communications.

    The E-Babylon deal will give ValueClick a bigger stake in online retail, as well as a new physical presence in Ventura County. In addition to $11.7 million in cash for the company, ValueClick will pay $3 million for the title to E-Babylon’s 24,000-square-foot warehouse in Simi Valley.

    Fuges said ValueClick will close its warehouse in Tarzana and move its operations to the Simi Valley facility.

    Sales of a few consumer products, including cosmetic cream, already make up about 10 percent of ValueClick’s business, Fuges said. Acquiring E-Babylon should nearly double e-commerce revenue, though the size of the Web Clients deal means e-commerce will remain at about 10 percent of total revenue.

    “It makes sense for us to be opportunistic and sell our own products to some of the people we advertise to,” Fuges said. Toner cartridges are a good fit, he said, because they bring recurring revenue, they are easy to sell and ship, and they have high profit margins.

    E-Babylon sells through the Web sites 123inkjets.com and 411inkjets.com. In 2002, it paid $40,000 to settle a dispute with the Federal Trade Commission. The FTC alleged that E-Babylon advertised its used and generic cartridges as new, brand-name items.

    Fuges said ValueClick was satisfied that those problems were corrected years ago. “We were aware of the complaint, and if it was something we were worried about, I don’t think you would have seen this deal,” he said.

    Web Clients is an affiliate marketing company, a niche that ValueClick already occupies with its Commission Junction unit. Web Clients runs a network of Web publishers and advertisers, and owns a database of about 30 million e-mail profiles, Fuges said.

    Web Clients also owns Web sites like DirectScholar.com, a database of college programs. These sites will bring interested consumers to ValueClick; as with traditional advertising, ValueClick must find the right consumers.

    “What they do very well, that we haven’t done, is build their own Web sites that are vehicles for lead generation,” Fuges said. “That’s something we’re very excited about adding to the list of things we can do.”

    Web Clients Chief Executive Officer Josh Gray will stay on as a ValueClick executive and will continue to run the business. E-Babylon will be folded into ValueClick’s Hi-Speed Media division.

    On the day the deals were announced, ValueClick’s stock jumped from $10 to $11 per share. Two days later, it had crept back down to about $10.