ValueClick Stock Soars
Vishesh Kumar
05/18/07 - 11:24 AM EDT
Another buyout in the sizzling online ad space is making
ValueClick(VCLK - Cramer's Take - Stockpickr) an even hotter property.
Shares of the Westlake Village, Calif., digital marketing firm soared 9% in furious trading Friday after
Microsoft(MSFT - Cramer's Take - Stockpickr) agreed to pay $6 billion in cash for online ad firm
aQuantive(AQNT - Cramer's Take - Stockpickr).
ValueClick rallied mostly on speculation that the aQuantive deal -- which featured a stunning 83% premium to Thursday's prices -- makes ValueClick the most likely online media player to be acquired.
But because of the dynamics of the scorching-hot online advertising business, ValueClick stands to be a winner even if a bid doesn't emerge soon. That's because online advertisers will value its independence from the likes of Microsoft and
Google(GOOG - Cramer's Take - Stockpickr).
Microsoft's surprise $66.50-a-share bid for Seattle-based aQuantive, unveiled earlier Friday, extends the merger frenzy that has recently hit the online ad space.
(To watch an interview with Vishesh Kumar discussing today's deal, click
here .)
A deal by Microsoft was expected ever since it lost out to Google in a bidding for privately held
DoubleClick in April. But the circumstances of the transaction raise some interesting considerations for investors.
First, the size of the deal and the rich valuation Microsoft was willing to pay signal just how competitive the bidding process was. The $6 billion cash transaction values aQuantive at 86 times 2007 consensus estimates, points out S&P analyst Scott Kessler.
And while the price tag takes a definite backseat at Microsoft -- which has boatloads of cash but has struggled to break into the booming online ad market -- who could have given the software giant such a run for its money?
Before Thursday,
Time Warner's(TWX - Cramer's Take - Stockpickr) AOL division may have seemed like the knee-jerk candidate. But traditional online ad firm
WPP's (WPPGY - Cramer's Take - Stockpickr) acquisition of 24/7 media for $649 million throws the door open to a host of new companies beyond the big name Internet suspects.
Old world ad companies like
Omnicom(OMC - Cramer's Take - Stockpickr) and
Interpublic(IPG - Cramer's Take - Stockpickr) may now be in the running to add an online ad property as well.
All of that bodes well for ValueClick, which, with a market cap of $3.3 billion, has the heft to give its suitor an overnight footprint in its fast-growing business. But if the market's reaction to the 24/7 Media Deal and Microsoft's willing to shell out a premium is an indication, that may not be enough.
More to the point, investors have a reason to take a close look at ValueClick even if a deal is not in the works. As the last major independent player in the space, ValueClick may serve as a haven to DoubleClick and aQuantive customers who do not want to take the risk of having their online stats shared with Google and Microsoft -- companies they see as competitors.
Indeed, before selling out to Microsoft, aQuantive made precisely the same argument regarding Google's acquisition of DoubleClick.
"We think we can continue to win market share from DoubleClick as we have consistently over the past five years," aQuantive CEO Brian McAndrews said in the company's first-quarter conference call for investors. "And now we have the added opportunity of being the only independent player."
Even if ValueClick doesn't benefit from being picked up, it now has a lot to gain from being alone.
