AOL could face competition in bid for TradeDoubler

AOL, the Internet unit of Time Warner, is likely to face competition in its attempt to purchase TradeDoubler, a Swedish online marketing firm, said Kaupthing Bank Equity Research Analyst Mikael Laséen, who has watched the drama unfold. Laséen told the E-Commerce Times that he would not be surprised if a number of companies, including Google, were to step out of the wings and outbid AOL in the coming days. The same reasons fueling AOL's interest in the company are sure to prompt competitors and possibly initiate a bidding war, he said. A Boost in Europe "It looks like a nice fit, but also one should perhaps remember there are other possible candidates that could also be interested in TradeDoubler," Laséen commented. "TradeDoubler has dealt with a number of prior offers but turned them down because the bid levels were too low." ValueClick, which bills itself as one of the world's largest integrated online marketing companies, "is a possible candate," Laséen suggested. "And Google? Why not?" The AOL offer to buy TradeDoubler for about US$900 million -- an effort to bolster its European online advertising abilities -- did not sit well with all of TradeDoubler's investors. One in particular -- Alecta, a Swedish pension group that claims 10.1 percent ownership of TradeDoubler -- rejected the bid, according to published reports. Since the deal requires approval by at least 90 percent of TradeDoubler's investors, Alecta's unhappiness could either kill the deal or force AOL to up the ante. Less Emphasis on Subscriber Model AOL's offer is generally regarded as somewhat low and in need of sweetening, a view shared by Laséen. The TradeDoubler bid follows the sale of AOL's Internet access businesses in Europe. The company is moving away from using subscribers as a revenue source, opting instead for an advertising-based system. TradeDoubler would fit right in with that plan. "Obviously, the two companies fit very well together from a strategic point of view," said Laséen. "They seem to be very complimentary." Owning TradeDoubler will help AOL succeed in the "cost-per-click" business model, he said. "That's why we have TradeDoubler trading at 227 (Swedish crowns, or about US$32.36, per share), quite a bit above 215 (Swedish crowns, or about $30.65 -- the price being offered by AOL). Everybody expects a competing bid." Catbird Seat TradeDoubler is in an enviable position, as its attractiveness to potential buyers has been known for some time. "One should also remember that the price before the official [AOL] bid was driven by speculation that there could be a bid or bids on the company," said Laséen. "They rejected a bid in December. There have been other bids in Stockholm that were of a fairly low premium-to-share price prior to this bid," he noted. "Not only does our offer provide an attractive premium valuation," Jeff Bewkes, president and chief operating officer of Time Warner, said in a statement, "but it also will enable TradeDoubler to play a key role in our strategic focus on growing our online advertising business in Europe."

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