MediaMind Sells for $517m

All-cash deal for online advertising company is Israel's biggest exit of the year.

Online advertising company MediaMind Technologies is being sold in the biggest exit for an Israeli company this year, and one of the country's biggest ever. Advertising distribution company DG FastChannel will acquire MediaMind for $517 million in cash as it expands abroad and strengthens its online and television advertisement business. The companies announced the agreement yesterday.

MediaMind, formerly called Eyeblaster, currently has about $100 million in cash in its kitty.

mediamind - Ofer Vaknin - June 17 2011
Ofer Vaknin

Under the deal, DG will pay MediaMind's shareholders $22 per share in cash, a 38% premium to MediaMind's close on the Nasdaq on Wednesday.

But MediaMind shares rose 39% to an all-time high of $22.49 yesterday, indicating investors are expecting a higher offer. DG FastChannel's shares fell 6% to $27.31.

Both companies' boards have already approved the deal.

Only $57 million has been invested in MediaMind soa far. The big winners from the sale are Jonathan Kolber and Sycamore Technologies Ventures - an investment fund controlled by Eli Barkat and his brother Nir, the mayor of Jerusalem. Sycamore will receive $124.8 million for its 20% stake in the company.

Insight Venture Partners holds 16% of MediaMiand, worth $83.2 million. Kolber, the former chairman of Koor Industries, and Eli Barkat invested in the company in 2007.

MediaMind was founded in 1999 as Eyeblaster. Two of the four founders are still with the company: CEO Gal Trifon and Ofer Zadikario. Trifon and Zadikario will be getting $31.2 million and $26 million respectively. Trifon will become DG's chief digital officer, leading its online advertising business.

The company has 400 employees, 200 of whom are in Israel.

The firm has developed systems for managing digital advertising campaigns. A number of the world's largest advertising agencies are clients and use the company's products to track the effectiveness of their online campaigns. Big advertisers are among the clients.

Irving, Texas-based DG FastChannel, which enables the electronic delivery of advertisements, syndicated programs and video news releases to broadcasters, online publishers and other media outlets, sees the deal enhancing its offerings for the fast-growing TV and online advertising markets.

"We believe this transaction offers significant value for our shareholders and is the natural, next step for MediaMind. DG will provide us with the added scale and resources to continue to grow our platform and enhance the services we provide our customers," said Trifon.

"Working together with DG, we will provide a single solution for advertising creation, distribution, and monitoring for cross-platform campaigns. We are excited to partner with DG to continue to increase our base of large advertisers and expand our global operations, and we are confident that our employees will benefit from the greater opportunities at the combined company."

DG FastChannel also said the acquisition - its eighth since it was founded in 2005 - would enable the company to penetrate the Latin American, Asian, European and African markets.

"DG is a 100% North American business and MediaMind is 75% international, so the challenge for MediaMind was to have deeper relations with U.S. advertisers and DG has that, so they can leverage the combined assets," said Oppenheimer analyst Jason Helfstein. "So one plus one equals more than two," he said.

MediaMind is based in New York. It went public last August, and priced its offering 23% below the expected range. The IPO valued the firm at $206 million, with the share price for the offering $11.50.

But the company's shares have risen about 20% over the last six months on market-topping profits, helped by increased advertising spending from customers.

"This is a game-changing transaction that provides DG with an unmatched global footprint, broad customer reach and an innovative platform in television and the fast-growing online advertising market," said Scott Ginsburg, chairman and chief executive of DG.

"MediaMind's online business excels in rich media and fits well with our unparalleled distribution platform for high-value broadcast content - enabling advertisers to most effectively connect with audiences globally. With its new global reach and enhanced product offerings, DG will gain critical mass and will have the unique ability to provide a suite of cross-platform advertising management and distribution services."