Demand Media Soars on Report Deal to Go Private Dissolves

Demand Media Inc., operator of and domain-name business, rose to the highest price in seven months after AllThingsD said the company had discussed with Thomas H. Lee Partners a $1.2 billion deal to go private that fell apart.

Demand Media soared 15 percent to $8.31 in New York, the highest closing price since Sept. 27. The Santa Monica, California-based company has gained 25 percent this year.

Demand Media would have been worth twice its April 27 market valuation of $608 million, according to the report. The company may see large gains in its domain-name registration business after an expansion of potential website addresses announced by the Internet Corporation for Assigned Names & Numbers, said Douglas Arthur, an Evercore Partners Inc. analyst in New York.

“Private-equity firms have been very active in that business,” said Arthur, who lowered his rating to the equivalent of hold from the equivalent of buy, based on Thomas H. Lee Partners reported bid of around $11 a share. Arthur pegged a target price of $9.

AllThingsD, which didn’t identify its sources, said the deal dissolved over complications related to financing and executive retention.

Demand Media went public in January 2011 by selling 8.9 million shares at $17 apiece.

Kristin Moore, a Demand Media spokeswoman, declined to comment in an e-mail, citing a quiet period ahead of the company’s first-quarter earnings report due May 8.

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