IAC/InterActiveCorp and Ask Jeeves have signed an agreement under which IAC will purchase Ask Jeeves.
Under the terms of the agreement, IAC will issue 1.2668 shares of common stock for each share of Ask Jeeves common stock in a tax-free transaction valued at $1.85 billion net of cash acquired. IAC intends to buy back through its previously authorized share repurchase programs at least 60% of the number of shares it will issue for this acquisition, thus effectively offsetting a substantial portion of the dilution from the transaction with cash. IAC expects the acquisition to be accretive to 2005 Adjusted EPS assuming the buyback at the 60% level.
Barry Diller, Chairman and CEO of IAC, said, “Ask Jeeves was founded almost ten years ago based on the idea that simple text search results alone are not sufficient or satisfying – but, rather, that consumers want answers to questions – and questions posed in natural language and answered with spot-on accuracy were especially desired and appealing. Of the many search engines launched during that time, Ask was one of the very few that established itself … and we believe that in the future it has the potential to become one of the great brands on the Internet and beyond, and by beyond we mean in wireless, in the search for anything on any device. It is that belief, powered by IAC’s wealth of resources and thriving businesses, together with the continuing strong management of Steve Berkowitz and his team, that is the impetus for this transaction.”
The online advertising and search markets are growing rapidly; of the $260 billion in total U.S. advertising spend in 2004, less than $10 billion, or 4%, is online, with an expected annual growth rate of 13%. Search is now 36% of U.S. online advertising and expected to grow 24% per year over the next five years (Source: Merrill Lynch Equity Research.)
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