Buying Binge Helps Shore Up Position in Battered Ad Market

Technology
by Christopher Keough

ValueClick Inc.'s $120 million acquisition of BeFree Inc., announced last week, is yet another attempt by players in the limping online advertising sector to protect themselves in tough times.

The deal, scheduled to close by the end of June, would bring to five the number of companies ValueClick has acquired in the past two years. Other acquisitions include Mediaplex Inc. and its AdWare Systems subsidiary in October for about $30 million in stock.

"A number of smaller firms are lashing themselves together so they can better weather the storm," said Lanny Baker of Salomon Smith Barney Inc. "This expands what they can take to advertisers, which is a pretty critical thing in this market. They now have a fuller-service restaurant than they had a week ago."

Marlborough, Mass.-based Be Free's largest client is Barnesandnoble.com Inc., which uses BeFree technology to list products on affiliate Web sites. If a user clicks through to Barnes & Noble's site and buys a book, Be Free gets paid.

Under terms of the deal, each Be Free common share would be converted to 0.65882 shares of ValueClick stock. The new company will be called ValueClick and maintain headquarters in Westlake Village.

With combined cash and securities totaling $270 million and projected annual revenue of $83 million, the new company anticipates breaking even by the end of the year.

Racking Up Deals

OSI Systems Inc. continued its successful post-Sept. 11 run, landing a $10 million deal to provide X-ray pre-scanners for explosive detection systems.

News of the deal with InVision Technologies Inc. of Newark, Calif., helped boost OSI's stock to a record high of $28.97 on March 13. The price settled to close down $1.62 for the day.

The pre-scanners will be delivered to InVision by the end of the year, according to spokesman Sanjay Sabnani. The pre-scanners are a component of InVision's $170 million order for explosives detection systems from the Department of Transportation's Transportation Security Administration. The order calls for 100 machines as well as parts kits to build another 300 machines to meet requirements outlined in the recently passed Aviation Security and Transportation Act.

With more than $30 million in business inked since Sept. 11, revenues at OSI Systems are up 600 percent over the like period last year, Sabnani said.

PR Function Funded

Web-based public relations company Internet Wire reported a $4 million round of funding that a company official said will take it to profitability in the third quarter.

The new funding, Internet Wire's third round, brings the total raised to $24.6 million, according to Chairman Michael Terpin. Internet Wire was founded in 1999 by Terpin and Michael Shuler, who has since left the business but retains an equity interest. Terpin said revenues in 2001 grew 20 percent over 2000, though he declined to release numbers.

Internet Wire charges $325 per press release, which it distributes to online news outlets such Yahoo, Bloomberg and Dow Jones over the Internet and through e-mail. The price is one-third of what its main competitors, PR Newswire and Businesswire, charge, according to Terpin.

The latest round of funding was led by Blue Chip Venture Co. of Cincinnati.

Internet Wire gained notoriety in 2000 when a former employee used the service to post an erroneous press release about Emulex Corp. When Internet Wire failed to check the veracity of the release, which said the chief executive had quit and the company was restating its quarterly earnings from a profit to a loss, it was picked up by other wires.



Staff reporter Christopher Keough can be reached at (323) 549-5225 ext. 235, or at ckeough@labusinessjournal.com.

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