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ValueClick Takes Poison Pill to Fend Off Takeovers

ValueClick Takes Poison Pill to Fend Off Takeovers Poison Pill Strategy: Intended to stabilize stock price and guard against takeovers. By CARLOS MARTINEZ Staff Reporter Westlake Village-based ValueClick Inc. has adopted a so-called “poison pill” stockholder rights plan aimed at staving off a potential hostile takeover. The online advertising firm, whose stock value has hovered around the $2 mark in recent months, said it is attempting to protect the value of the company to its shareholders. “The board believes that adoption of a rights plan is the best available means of protecting the full value of our stockholders’ investment,” said James Zarley, ValueClick chairman and CEO, “and encouraging potential acquirers to negotiate with the board of directors prior to attempting a takeover.” ValueClick is an online advertising provider that places ads for its clients through a network of 25,000 Web sites relating to business, entertainment, sports and travel. Unlike some of its competitors, it charges its clients only when Web users click on their ads. The stockholder rights plan, commonly known as a “poison pill,” is a strategy used by corporations to avert a hostile takeover by another company. It can be risky because it can depress a stock’s value if investors feel a company is takeover-proof or that its management is too entrenched. Under the plan, approved by stockholders June 5, the company will distribute a purchase right for each share of outstanding stock. Each right will allow stockholders to buy a share of preferred stock for $25. It also forces anyone who acquires 15 percent or more of the company’s stock to purchase shares of the company’s preferred stock at twice that, $50. For example, if a shareholder is approached by a firm attempting a hostile takeover, the shareholder can exercise his or her rights to purchase shares in the company’s preferred stock, but is then obligated to sell that stock, if he or she chooses to, for twice its value. The company, however, will be allowed to redeem the rights for the preferred stock for 1 cent per right for 10 days after a public announcement relating to any merger or attempted takeover. This allows the company to acquire the preferred stock shares in instances where it is willing to be taken over by another firm. The rights will expire in 2012. Tony Rodriquez, the company’s vice president of finance, said the plan is meant to force any potential suitors to deal with the company’s board of directors, not individual shareholders. Lanny Baker, an analyst with Solomon Smith Barney, said the company wants to show it’s in business for the long haul and aims to grow the company slowly. “It’s in a business that’s planted at the bottom of the cycle and it’s showing some hints at recovery,” Baker said. “They have a lot of cash on hand and that makes them a good takeover candidate.” Rodriquez said the company does not foresee any potential takeover suitors, but merely acted in order to maintain the share’s proper valuation in cases of one. ValueClick’s stock traded June 21 at $2.90, with a 52-week high of $3.36 and a 52-week low of $1.87. The top institutional owners of ValueClick stock are William Blair & Co., with 1.3 percent, and RS Partners Inc., with about 1.1 percent. For the quarter ending March 31, the company reported a net loss of $1.1 million on revenues of $12. 4 million, compared to a $2.1 million net loss on revenues of $12.7 million for the same period a year earlier. A day before the “poison pill” plan was approved, the company allocated $20 million for its stock repurchase program. In September 2000, ValueClick’s board of directors approved a $10 million stock repurchase program aimed at reducing the number of its outstanding shares, which now number 97.1 million. The company has $281.4 million in cash and securities after it acquired fellow online marketer, Be Free Inc., in March as part of an all-stock deal valued at $128 million. That deal is expected to close by the end of June. The deal marks the company’s fifth acquisition in two years. Last October, the company acquired online ad server and software maker MediaPlex and in 2000 it acquired online marketers StraightUp!, OnResponse and Z Media, an e-mail direct marketing firm. Through these acquisitions, ValueClick has landed a number of major clients such as Barnes and Noble, CitiGroup Inc., Travelocity.com, Sony Corp of America and IBM Corp. Solomon Smith Barney’s Baker said the company will likely turn a profit for the first time in the fourth quarter after years of losses. “They’ve amassed a credible set of assets for advertisers trying to market on the Internet and it’s a reasonable assumption that they’ll become profitable by the fourth quarter,” he said.

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