The 24/7 Real Media (TFSM-NASDAQ) buyout price now looks silly after this premium that Microsoft (MSFT-NASDAQ) is paying to acQuire aQuantive (AQNT-NASDAQ).  Lets forget about the percentage premiums and just look at the multiples.  At a $6 Billion payout based on forward revenues and earnings, there is a huge discrepancy between TFSM/AQNT. 

Depending on what service you use for forward estimates you come up with roughly 77-times forward non-GAAP earnings and about 9-times forward revenues.  These numbers would not have been this high if the bidding for aQuantive wasn’t so high, but Microsoft’s price is the rule-setter.

If you apply the same numbers to TFSM it is pretty sick.  On the forward earnings estimate basis for TFSM you can derive in the vicinity of a theoretical $37.50 price.  On a forward revenue basis you could derive something nuts like a $45.80 price.  The truth is that there is debt and intangibles and all sorts of ‘exceptions’ that would skew these numbers and you would have to be a mad man to believe that TFSM would really sell for a premium like that.  But in a bidding war environment where Google paid up for DoubleClick and where Microsoft goes out this far and this high to buy Aquantive means that management agreeing to a $11.75 buyout price is nearly cowardice.

The basic multiple comparisons are just not as fair because the only two companies that were identical in the models were TFSM and DoubleClick, so trying to use an exact comparison would be flawed.  On May 10, we noted that the starting valuations could put TFSM at a $11.81 starting price and a value that at certain extremes could fetch $19.75.  We noted that somewhere in the middle at say $15.00 or higher could be feasible.  So why is TFSM selling so cheaply?

This leaves ValueClick (VCLK) as the last ‘independent’ man standing, and that is up 11% today.

Jon C. Ogg
May 18, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.

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