blinkx confirmed today that it had delivered a letter to the Board of Directors and CEO of MIVA, Inc. in which blinkx has revived its proposal to acquire MIVA, for a revised cash consideration of $0.55 per share.
MIVA is a Nasdaq-listed digital media company. It describes itself as having two focuses to its business: owning and operating a portfolio of consumer destination sites and interest-specific toolbars, through its MIVA Direct division; and running a third-party contextual Pay-Per-Click ad network focused on key vertical sectors, through its MIVA Media division. MIVA, Inc. operates across North America and throughout parts of Europe.
blinkx believes the proposal is highly attractive for MIVA shareholders, particularly in light of issues in the MIVA business and current market conditions. blinkx's proposal represents a 108% premium above the closing price of MIVA common stock of $0.2643 on November 18, 2008, and a 39% premium over the average closing price for the thirty days prior to November 18, 2008.
Commenting on the proposal, blinkx CEO and Founder Suranga Chandratillake said: "Given the strength of our financial results last week, it's clear that certain emerging sectors of online advertising, specifically video, continue to thrive. blinkx is uniquely positioned to capitalize on that opportunity. We believe there is significant value in the MIVA business and real potential to increase that value for shareholders through the proposed transaction. However, because of MIVA's continued loss-making performance and rapidly declining cash position, time is of the essence. We trust that the MIVA Board will recognize that expediency is critical to realizing the benefits of this opportunity and providing stability to MIVA shareholders, customers and employees."
Mr. Chandratillake continued, "When we first publicly proposed to acquire MIVA in August 2008 we were clear in our public and private communications that we could fund the acquisition through available cash resources. We can still do so today, regardless of MIVA's significantly reduced cash position, so let there be no confusion as to the source of capital for this deal."
blinkx has worked with MIVA as a customer and partner for a number of years and respects MIVA's achievements in building a global keyword advertising network and growing the MIVA Direct consumer offering. However, the MIVA business has reported a decline in cash for the past four quarters, and blinkx is concerned that valuable time has been wasted whilst MIVA's resources dwindled, resulting in constraints on capital to facilitate growth. Moreover, MIVA has resorted to an expensive line of credit to fund future operations, which is also likely to impact future growth prospects in exchange for short-term working capital benefits.
Furthermore, recent trends raise the possibility of continued diminution of shareholder value.
- MIVA has reported reduced revenues for the last eight consecutive quarters
- Advertising spend related to the distribution of the Direct business' toolbars has declined for the last two quarters
- Total installed toolbars declined 11% quarter-on-quarter from Q2'08 to Q3'08
- Significant un-reserved liabilities may remain related to the European restructuring
Despite the foregoing, blinkx continues to believe that a combination of the two companies - fusing blinkx's technology with MIVA's distribution network - presents an exciting and compelling opportunity, and one that would prove mutually beneficial to both companies' shareholders, employees, and customers.
Specifically, blinkx's advanced and scalable matching technology would enable immediate platform improvements for MIVA. As a result, large portions of relevant search traffic from MIVA's search ad network would be monetizeable at higher rates through blinkx's technology. Furthermore, blinkx's technology holds the potential to build on MIVA's existing toolbar network, adding ground-breaking functionality and an entirely new revenue stream. Finally, MIVA's consumer sites and portals, which already attract large audiences, will immediately benefit from blinkx's advanced video technology and AdHoc advertising platform.
Any acquisition of MIVA would be subject to the making of a formal offer following the opportunity to conduct a limited confirmatory due diligence investigation, the negotiation of a definitive merger agreement containing customary terms and conditions, including customary conditions to closing; no material adverse change to MIVA's business; appropriate shareholder approvals; and any regulatory requirements. Given blinkx's participation in the industry and MIVA's public status, blinkx envisages an efficient due diligence process appropriate to a public company. blinkx is prepared to deliver a draft merger agreement to MIVA and begin discussions immediately. Should an offer proceed it could be classified as a reverse takeover by Aim Regulation necessitating the publication of an admission document.
The transaction would be funded from existing cash resources of the two companies.