News Corp. Agrees to Buy Intermix for $580 Million
By RIVA RICHMOND and JANET WHITMAN
DOW JONES NEWSWIRES
July 18, 2005 5:53 p.m.
News Corp., joining a parade of media companies looking to grab a bigger
piece of the fast-growing online advertising market, agreed to buy
controversial Internet company Intermix Media Inc. for about $580 million
in cash.
Intermix made headlines earlier this year after New York Attorney General
Eliot Spitzer alleged the Los Angeles company illegally distributed
"spyware" and "adware" on millions of personal computers without proper
consent. Intermix agreed in June to settle Mr. Spitzer's suit, without
admitting wrongdoing, by paying a $7.5 million fine and making permanent
its freeze on distributing the programs.
As part of the transaction unveiled Monday, Intermix has exercised an
option to acquire the 47% it doesn't already own of popular
social-networking site MySpace.com, its key asset, which in June served up
an estimated 8% of all ads on the Internet, according to News Corp.
With the deal, News Corp., controlled by media baron Rupert Murdoch, will
nearly double its Web traffic in the U.S. to more than 45 million unique
monthly users. Intermix operates more than 30 Web sites, many of which
offer content like greeting cards, games and quizzes. Intermix reported a
profit of $4.5 million on revenue of $78.9 million in the fiscal year ended
March 31.
"Intermix's brands, such as MySpace.com, are some of the Web's hottest
properties and resonate with the same audiences that are most attracted to
Fox's news, sports and entertainment offerings," said News Corp. Chairman
and Chief Executive Rupert Murdoch in a statement.
The deal marks the first acquisition by News Corp.'s newly formed Fox
Interactive Media unit, set up in an effort to boost online revenue by
selling advertising across Web sites for the Fox broadcast network, Fox
News Channel and Fox Sports, which had previously operated separately.
News Corp. is paying $12 a share for Intermix, a 12% premium to Friday's
close of $10.72 a share. Intermix shares gained 9.4%, or $1.01, to $11.73
in afternoon trading on the American Stock Exchange. News Corp. fell 8
cents to $17.39 on the New York Stock Exchange.
The acquisition makes News Corp. the latest in a long list of media
companies in the past several months that have made moves to boost their
exposure to Internet advertising. Viacom Inc.'s CBS recently expanded its
online offerings and last month E.W. Scripps Co. bought comparison-pricing
site Shopzilla for $525 million. Earlier this year, Dow Jones & Co.,
publisher of the Wall Street Journal Online, bought financial news site
MarketWatch for $519 million, while New York Times Co. purchased community
portal About.com for $410 million.
But News Corp. is taking in a company with a more troubled and storied
past. In 2003, Intermix restated earnings, had its stock delisted from the
Nasdaq and shed its top two executives. Mr. Spitzer's suit battered
Intermix's stock and threatened to tarnish a turnaround being engineered by
Intermix Chief Executive Richard Rosenblatt, who previously headed DrKoop.com.
The stock recovered on news of the agreement to settle with Mr. Spitzer.
However, the agreement is not yet final, a spokeswoman for Mr. Spitzer said
Monday. A spokeswoman for News Corp. declined to comment.
Intermix has said that it was, prior to the suit, in the process of
"scaling down" its adware business, which was initiated by its previous
management team. The business was no longer material to its financial
results, the company said.
Adware are software programs that display Internet advertising, such as
pop-up ads, and are typically installed with murky or no notice. Often,
they come bundled with other legitimate programs people want. They have
become a major irritant to consumers because, in addition to the annoyance
of intrusive ads, they can cause computers to slow considerably, can be
difficult to remove and sometimes collect information about consumers'
surfing habits.
================================
George Antunes, Political Science Dept
University of Houston; Houston, TX 77204
Voice: 713-743-3923 Fax: 713-743-3927
antunes at uh dot edu
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