Extreme Reach Inc. recently made an offer of more than $20 a share for rival Digital Generation Inc. (DGIT:US) that was rejected by the advertising-management company, said a person with direct knowledge of the situation. Digital Generation’s stock surged 26 percent.
Extreme Reach was told that the combination with Digital Generation might raise antitrust concerns, said the person, who declined to be identified as the deliberations are private. The company, which bid with Providence Equity Partners, has been excluded from the process, according to the person.
The per-share offer is more than double Digital Generation’s closing stock price yesterday. The Irving, Texas- based company, working with Goldman Sachs Group Inc. on finding buyers, tried to sell itself a year ago, when its name was DG FastChannel, people close to the situation said at the time.
That sale process stalled after Digital Generation agreed to buy MediaMind Technologies Inc. last June, the person said. The company paid $481.3 million for MediaMind, according to data compiled by Bloomberg. Digital Generation’s market value had sunk by about two-thirds since then through yesterday.
Digital Generation’s sale process also attracted interest from Hellman & Friedman LLC and other private-equity firms, said another person with knowledge of the matter. Goldman Sachs sent out information on the company in recent weeks, that person said.
The stock climbed (DGIT:US) to $12.13 today in New York, giving the company a market value of $334.5 million. The market capitalization as of yesterday was $264.4 million.
Closely held Extreme Reach, based in Needham, Massachusetts, operates a network connecting more than 2,000 advertisers and agencies to major broadcast networks and websites. Co-founder John Roland, who also serves as chairman and chief executive officer, had served as president of Digital Generation’s predecessor before starting Extreme Reach.
Representatives at Extreme Reach and Digital Generation didn’t immediately return calls seeking comment. A spokesman at Goldman Sachs declined to comment.
Digital Generation generated sales of $92.8 million in the first quarter, a 46 percent increase from a year earlier. Reuters reported earlier that Hellman & Friedman was looking at Digital Generation.
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