aQuantive lands major catch with Razorfish
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Seattle-based aQuantive is betting big that marketing opportunities presented by Web sites such as this will become increasingly important with time.
The online marketing and technology company yesterday agreed to buy the largest independent interactive advertising agency, SBI.Razorfish, for $160 million in cash and convertible notes.
The deal is by far aQuantive's largest acquisition.
Wall Street was indifferent to the news, and aQuantive shares closed yesterday at $10.44, down 50 cents.
New York-based Razorfish, which builds customer Web sites for Fortune 100 companies, including Kraft Food's Post division, Ford Motor and Microsoft, last year reported revenue of $93 million, excluding billings to clients for reimbursable costs.
The privately held company has more than 500 employees, with major offices in New York, Chicago and San Francisco. aQuantive plans to rebrand its online division to Avenue A/Razorfish.
Under the terms, aQuantive said it would pay $85 million in cash and $75 million in convertible notes. The cash portion of the deal would take up nearly two-thirds of aQuantive's cash reserves, which totaled $137.1 million for the quarter ended March 31.
This isn't aQuantive's first foray into this side of the business. In December 2002, it bought Philadelphia interactive agency i-Frontier to begin offering ad design and Web development to customers. Previously, it purchased ad space only on behalf of customers.
Mike Galgon, aQuantive's chief strategy officer, said the Web-site work I-Frontier performs is similar to Razorfish's. "It's just smaller by a couple orders of magnitude," he said.
aQuantive, which had sales of $221.9 million in 2003, expects the deal to add $41 million to $43 million in revenue during the year's last five months. Chief Executive Brian McAndrews said he doesn't anticipate "significant" job cuts.
Meantime, aQuantive is buying a bit of history in the process. During the height of the Internet boom, Razorfish was a $2 billion public company with 1,800 employees and offices in places such as Hamburg, Germany, and Helsinki, Finland.
As the online advertising market collapsed, it stumbled along with other online interactive agencies. SBI acquired Razorfish in January 2003 for pennies on the dollar.
Galgon said Web sites such as Postopia.com have become possible as U.S. users access the Internet via broadband connections.
Postopia, built by Razorfish, draws up to 2 million regular users, with kids spending an average 30 minutes per visit to play video games in which they can advance to different levels by buying Post products.
"Where Web sites were brochure-like five years ago, they've become TV-like today," Glagon said.
Material from Bloomberg News was included in this report.
Monica Soto Ouchi: 206-515-5632 or msoto@seattletimes.com