Conversant Inc., a major digital marketer based in Westlake Village, agreed to be acquired by a Texas firm for $2.3 billion in cash and stock, creating one of the world's biggest online marketing and data-driven companies.
Conversant, which changed its name early this year from ValueClick, will join forces with Alliance Data Systems Corp. in Dallas to help business customers distribute advertising online and measure how effective the ads are.
The companies said Thursday that Alliance will pay Conversant stockholders $35 a share — 48% in cash and the rest in stock. The deal, announced after the markets closed for trading, sent shares of both firms up sharply in after-hours trading.
"The strategic and cultural fit of the two companies is ideal," said Ed Heffernan, Alliance Data's chief executive. "Importantly, the acquisition bulks up Alliance Data in digital marketing, which is experiencing the fastest secular growth."
The companies said they compete for different parts of the $400 billion spent annually on conventional, digital and direct marketing in North America. Alliance had worked on both conventional and online advertising, while Conversant has built a big business strictly in the higher-growth digital arena.
Aaron Kessler, an analyst with Raymond James, said the deal could be "pretty attractive" for Conversant shareholders, given the company's slow pace of organic growth.
Alliance Data may have found it easier to acquire Conversant's established network of advertisers and online publishers, such as websites and mobile applications, than to build its own, he said. But it wasn't clear to him whether the deal offers advantages greater than the sum of the two parts.
"I think the question is, does one plus one equal three?" Kessler said.
Sameet Sinha, an analyst with B. Riley & Co. in Santa Monica said Conversant would fold into Alliance's Epsilon unit, primarily an offline company. "Now what is happening is that they felt they needed to grow their digital capabilities," Sinha said about Alliance.
Sinha said Alliance Data found both the capabilities and an inexpensive stock in Conversant. He said operating as part of a larger company may provide greater stability and more resources for Conversant.
The two companies act as go-betweens for other companies.
Conversant operates in two major fields, affiliate marketing and media. One unit, for instance, aggregates advertising offers, such as coupons, promotions or incentives from 3,000 advertisers and facilitates the placement of those offers on more than 60,000 websites and mobile applications.
"We do our business by sending the right message to the right person at the right time," said John Giuliani, Conversant's chief executive.
Alliance Data's businesses include conventional direct marketing, digital marketing, private-label credit cards and airline mileage programs, such as Canada's AirMiles Reward Program.
The boards of both companies have approved the deal, which is still subject to approval from Conversant shareholders and clearance by regulators.
The purchase price amounts to a 31% premium over Conversant's closing price Thursday of $26.71. The final price will depend in part on the company's stock price on the day the deal closes.
In after-hours trading, Conversant shares soared as much as 35% to $36. Alliance shares had dropped $6.34, or 2.4%, to $252.87 in regular trading, but gained it all back after hours.
Alliance Data said it expects the purchase to close by the end of the year and to be profitable immediately, adding 50 cents a share to earnings in the first year and 75 cents a share in the second year.