ValueClick Closes its Acquisition of FastClick (VCLK, FSTC)

ValueClick (ticker: VCLK) closed its acquisition of FastClick (ticker: FSTC). Extracts from Pacific Growth Equities analyst Derek Brown's note to clients:

INVESTMENT HIGHLIGHTS

ValueClick closes Fastclick acquisition. On 9/30/05, ValueClick closed on its acquisition of Fastclick. Under terms of the merger agreement, ValueClick acquired all outstanding shares of Fastclick common stock through the issuance of approximately 15.6M shares of ValueClick common stock and the assumption of options to purchase approximately 0.9M shares of ValueClick common stock (on a treasury stock basis) in a stock-for-stock transaction. Based on ValueClick’s closing stock price on 9/29/05 of $16.98, the total transaction value is estimated at about $280M (or, $200M net of cash).

Pro forma revenue guidance more sober than anticipated, though EBITDA margins seem higher. In conjunction with the acquisition’s close, ValueClick management offered an update to Q4:05 (and, thus, 2005) guidance that reflects the addition of Fastclick’s business. As seen in Exhibit 1, ValueClick’s management expects Fastclick to contribute incremental revenue and EBITDA of $22M and $2.4M (adjusted EBITDA is expected to be $3.9M), respectively, in Q4:05 — suggesting notably slower growth and higher margins than Fastclick management had expected of its own business (on 8/4/05 Fastclick management offered Q4:05 revenue and adjusted EBITDA guidance of $30.5M and $4.4M at the mid-point). Though we believe strongly that ValueClick’s management is being conservative in its assessment of Fastclick’s near-term growth potential, we believe it also seems fair to say that Fastclick’s management may have been overly aggressive in its expectations for business expansion. Importantly, ValueClick did not adjust Q4:05 or 2005 guidance for its existing core business (i.e., excluding Fastclick).

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