DG Slips on StarGuide Merger News

Shares in DG Systems (DGIT Quote), which distributes advertising to the broadcast industry over a digital network, fell 5 percent Monday after the company said it will merge with privately held streaming audio and video provider StarGuide Digital Networks in a stock deal worth about $350 million.

The move combines two companies headed by Scott Ginsburg, who is also the biggest individual shareholder of both firms.

DG Systems declined 3/8 to settle at 6 7/16. The stock has a 52-week high of 10 1/2 and a 52-week low of 3 1/8.

Under the terms of the deal, which is expected to close in the fourth quarter, San Francisco-based DG Systems will issue about 1.7 shares for each outstanding share of StarGuide common stock. DG Systems said it will issue a total of about 41.3 million basic shares and assume options and warrants covering 10.1 million shares, for StarGuide.

Current StarGuide shareholders will own more than 59% of the combined entity, while DG Systems shareholders will own about 41%, the companies said.

Overlapping technology and other operations will create cost savings and could result in job cuts, the firms said in a joint statement. Dallas-based StarGuide's Internet audio and video unit, called CoolCast, will be a centerpiece of the new company, the companies said.

DGIT operates a nationwide digital network which links advertisers and advertising agencies to more than 7,500 radio stations and 600 TV stations across the U.S.