Dow Jones to Acquire MarketWatch for $519 Million
Dow Jones & Co., publisher of the Wall Street Journal, has agreed to buy online financial news provider MarketWatch Inc. for $519 million in a bid to boost its revenue from the fast-growing Internet advertising market.
Dow Jones offered $18 a share for San Francisco-based MarketWatch, the companies said Sunday. New York-based Dow Jones would acquire $56 million in cash that MarketWatch has on its books. That would put the deal’s net value at $463 million.
The deal is expected to help Dow Jones, which has about 700,000 paid subscribers to its online edition of the Journal, court a wider audience for financial news and data through a free, advertising-supported business model.
The Internet, recovering from the dot-com bust in 2000, is now considered one of the fastest-growing advertising media.
Advertising dollars are flowing to the larger survivors of the bust. Overall online ad spending is expected to nearly double by 2009 to $16.1 billion and represent a much higher proportion of marketers’ total ad budgets, according to JupiterResearch.
Some analysts said that although the deal made strategic sense, the price was high.
“Traditional media companies that have a very strong market niche like Dow Jones need to become bigger players online because that’s where a lot of the ad spending is going,” said Douglas Arthur, a Morgan Stanley analyst. “I think it makes all the sense in the world -- it’s just not a cheap price.”
Edward Atorino of Fulcrum Global Partners said the acquisition would broaden Dow Jones’ “position in a very rapidly expanding part of the financial information market.”
“Everything but the price sounds terrific,” he said.
MarketWatch shares rose $1.33 to $18.12 on Nasdaq. Dow Jones shares edged up 10 cents to $45.10 on the New York Stock Exchange.
Founded in 1997, MarketWatch was a hot initial public stock offering during the dot-com boom, surging 474% in its first day of trading in January 1999 to $97.50 a share.
Like other Internet stocks, the shares have fallen sharply since then.
The company generated $47.2 million in revenue last year and has forecast 2004 revenue of $81 million to $83 million.
The deal, which requires approval of shareholders and regulators, is expected to close in the first quarter of 2005 and reduce Dow Jones’ earnings by about 5 cents a share next year. Dow Jones said the deal should begin adding to earnings in 2006.
The sites run by MarketWatch, including CBS.MarketWatch.com and BigCharts.com, provide financial information as well as investment analysis tools. MarketWatch has about 7.6 million unique Web visitors each month, according to industry data. The company also produces the TV program “CBS MarketWatch Weekend.”