DoubleClick Buys 30% Stake in ValueClick for $85 Million

Updated from 9:08 a.m. EST

DoubleClick (DCLK) has agreed to purchase a 30% stake in privately held ValueClick for $85 million, the Internet advertising companies announced Thursday.

ValueClick will receive $10 million in cash and $75 million in DoubleClick stock, which was up 3 7/16, or 3%, to 111 11/16. Also, DoubleClick has received a warrant to buy another 15% of ValueClick in the next 15 months.

New York-based DoubleClick also gets two seats on Carpinteria, Calif.-based ValueClick's board of directors.

The infusion of capital will be used to continue ValueClick's growth and expansion, including acquisitions, and develop its business. Additionally, the funding does not preclude the company's plans for additional financing and other sources of capitalization.

The agreement gives DoubleClick entree to ValueClick's cost-per-click model advertising network, where an advertiser pays only when an Internet user clicks on its banner advertisement. Meanwhile, ValueClick will integrate its technology platform with DoubleClick's Dart technology, which matches advertiser-selected target profiles with individual user profiles and delivers an appropriately targeted ad.

"DoubleClick is trying to ramp up its direct marketing network," said analyst Tomas Isakowitz of Janney Montgomery Scott. "Advertisers want this because it ties in dollars spent to direct actions." Currently, DoubleClick sends the majority of its online ads on a per-impression, rather than a per-click or direct-marketing, basis. But recently it announced an intention to launch a second network for per-click advertising. Isakowitz rates DoubleClick a buy and his firm has done no underwriting for the company.

DoubleClick competes with a number of companies either owned or spun off by CMGI (CMGI), including Engage (ENGA) and Flycast Communications (FCST). (CMGI agreed to acquire Flycast last year.) In fact, Flycast is the largest network utilizing the per-click model and "because DoubleClick did not have an important revenue-producing product on a per-click basis, it was important for them to go after this," commented Isakowitz. "Now they are aligning themselves with someone who is doing exactly that and this will jumpstart their own network a little bit faster."

Additionally, DoubleClick is now "able to distribute the Dart network across ValueClick's family of sites," which number over 11,000, according to analyst Dan MacKeigan of Friedman, Billings, Ramsey. He added, "As that online data alliance starts to pick up, accruing more data on users, DoubleClick can use data from that network to contribute to that alliance." He rates DoubleClick a buy and his firm has done no underwriting for the company.

In October, ValueClick filed a registration statement with the Securities and Exchange Commission for an initial public offering.

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