Jupiter/NetRatings merger grinds to halt on FCC warnings
The soap opera that is NetRatings Inc.'s acquisition of Jupiter Media Metrix Inc. pulled a fadeout yesterday after some very hard words from Federal Communications Commission staff.
The halted purchase leaves NetRatings' $16.4 million purchase of the 84 percent interest in ACNielsen eRatings.com that it doesn't own yet, up in the air. For its part, Jupiter is looking at its options by retaining Robertson Stephens Inc. as an advisor, and says it still plans to pursue its patent infringement lawsuit against NetRatings, slated for an Oct. 28 court date.
In early December, the two had received a second request from the FCC over an antitrust review. In mid-January, they announced they would proceed with the litigation, which had been postponed with the merger agreement.
"In light of the time required to comply with the second request and so that NetRatings and Jupiter Media Metrix can preserve their respective positions in the patent litigation, the two companies have agreed to permit the patent litigation between them, which had been put on hold as part of their merger agreement dated October 25, 2001, to proceed," the duo announced at the time.
But the FCC had more to say about the acquisition, and related loan and security deals between the two. FCC staff said it would "strongly recommend that the FTC challenge the loan and security agreement that the companies entered into in conjunction with the acquisition agreement," Jupiter says. The staff also rejected alternative loan structures and said it would "recommend that the FTC challenge the acquisition and seek a preliminary injunction enjoining consummation of the acquisition."
Under the original deal, NetRatings would purchase Jupiter for $1.95 per Jupiter share for a combination of cash and shares of NetRatings common stock.
"In the transaction, which will be taxable to Jupiter Media Metrix stockholders, those stockholders may elect to receive 0.1490 NetRatings shares or $1.95 in cash in exchange for each Jupiter Media Metrix share," the company noted recently, during FCC scrutiny. "The price per Jupiter Media Metrix share is subject to possible reduction to reflect any drawdowns by Jupiter Media Metrix under a loan agreement the companies entered into in connection with the acquisition, as well as certain expenditures by Jupiter Media Metrix in excess of $5 million to terminate various international joint ventures. The merger agreement provides that no more than 50 percent nor less than 30 percent of the aggregate transaction consideration will be paid in cash."
As part of the deal, NetRatings agreed to lend Jupiter up to $25 million, subject to certain conditions, under a secured credit facility that would replace a standby letter of credit arrangement between Jupiter and its chair, Tod Johnson.
The FCC's specific concerns were not disclosed.