Alliance Data to Buy Conversant for Advertising TechnologyCrayton Harrison and Sarah Frier
Alliance Data Systems Corp. agreed to buy Conversant Inc. for $2.3 billion, gaining technology to distribute advertising across the Internet and measure the effectiveness of marketing campaigns.
Alliance Data will pay $35 a share for Conversant -- formerly known as ValueClick -- with 48 percent in cash and the rest in stock, according to a statement yesterday. The transaction values Westlake Village, California-based Conversant at about 10 times its expected adjusted earnings before interest, tax, depreciation and amortization.
Shares of Conversant soared as much as 35 percent in extended trading to $36 following yesterday’s announcement of the deal. Alliance Data stock rose 2.4 percent in extended trading to $259.
Conversant focuses on affiliate marketing, helping companies personalize ads and target users based on their previous Internet searches on mobile or desktop devices. The company had been undervalued because investors didn’t understand its business, and may have been more interested in ad companies with higher growth, said David Silverman, managing director of Blue Harbour Group, which owns 4.75 percent of Conversant.
The acquisition is at “a decent, respectable premium,” Silverman, whose firm has more than $3 billion under management, said. “We think Conversant is one of the better assets out there because not only are they in the digital marketing space, but they actually make money, which makes them unique.”
The companies said in the statement that they compete for different parts of the $400 billion in annual U.S. marketing spending, with Alliance Data focused on direct mail, catalogs and digital, while Conversant has concentrated entirely on digital marketing like search, social and mobile.
“The acquisition bulks up Alliance Data in digital marketing, which is experiencing the fastest secular growth,” Ed Heffernan, Alliance Data’s chief executive officer, said in the statement.
Conversant’s technology will be an extension of Alliance Data’s loyalty-marketing services, such as private-label credit cards and airline-miles programs. The acquisition will add 50 cents a share to earnings in the first year and 75 cents in the second, Plano, Texas-based Alliance Data said.
Conversant this year sold its content websites, which also included PriceRunner and CouponMountain.com, while changing its name. It also bought SET Media Inc., a video technology company, to help strengthen its position in the digital-video advertising market.