CMGI Inc. announced plans Tuesday to reacquire the remaining outstanding shares of struggling marketing and content management software developer Engage Inc., effectively reabsorbing the company it took public three years ago.
CMGI launched Engage as an online advertising network in 1998, then took the company public a year later, though it remained a majority investor in Engage and now owns 75 percent of the company.
Under terms of the proposed deal, CMGI would exchange 0.2286 of a share of CMGI common stock for each outstanding share of Engage stock. The offer represents a value of $0.24 per share of Engage common stock, making the deal worth about $11.8 million. In early 2000, Engage stock had traded close to $100 a share.
CMGI, a pioneer of online marketing and advertising, had consolidated its other online advertising startups Flycast Communications Corp. and Adsmart Corp. into Engage. Engage or CMGI also acquired Virtual Billboard Network, MediaBridge Technologies Inc., AdKnowledge Inc. and Internet Profiles (I/PRO) Corp., all of which Engage absorbed.
But as dot-coms collapsed and the effectiveness of online advertising was called into question, online ad spending by companies began to shrink, dooming Engage.
Last August the company announced a shift to providing content management software for companies engaged in multichannel marketing and put its online advertising business up for sale. Engage then sold AdKnowledge to Bluestreak Inc. last September (it had sold I/PRO to TopicalNet Inc. in March 2001) and abandoned the rest of its online advertising network business at the same time, though it continued to develop and sell software for companies to serve and manage their own online ads.
But Engage found little success in the software business as its revenues continued to plummet while losses mounted. The company announced Tuesday that it expects to lose between $7.2 million and $8.0 million from operations (not including charges for amortization, stock-based compensation and restructuring) on between $5.3 million and $5.6 million in revenues for its fiscal third quarter ended April 30.
CMGI announced Tuesday that it expects an operating loss of about $54 million on $188 million in revenues for its fiscal third quarter ended April 30.
Both CMGI and Engage are based in Andover, Mass.