Acxiom (ACXM 39.50, +5.29, +15.46%) is trading 15% higher today on news that it
will sell its Acxiom Marketing Solutions business (AMS) to Interpublic Group
(IPG), one of the world's largest advertising agencies. ACXM had already run
14% yesterday during market hours when a Reuters news report circulated that a
deal for its AMS unit was near. From Friday's close, the stock is trading
higher by over 30%.
Acxiom is a data market company with two major segments. First, its AMS segment, which collects, manages, and sells reams of anonymous customer purchase data. This data is then used by brands to better tailor their advertising campaigns. Its other major segment is LiveRamp, which allows companies to onboard all sorts of offline and online customer data to one of 575+ LiveRamp partners to deploy targeted ads to known customers. The AMS segment is much larger, but its LiveRamp platform is growing much more quickly.
Turning to the details of the IPG deal, Acxiom will receive $2.3 bln in cash, and the deal should close by the end of calendar year 2018. Upon closing, the company expects to realize approximately $1.7 bln in net cash proceeds, after taxes and fees. Following the completion of the transaction, Acxiom intends to: 1) retire its existing $230 mln debt balance, resulting in a debt-free balance sheet; 2) initiate a $500 mln cash tender offer for its common stock; 3) increase its share repurchase authorization by up to $500 mln; and 4) use the remainder to fund its growth initiatives.
In addition, the Acxiom name and trademarks will go to IPG. The remaining independent Acxiom business will be renamed LiveRamp and, shortly thereafter, will begin trading its stock under the new ticker symbol "RAMP". Acxiom explored a wide range of strategic options and considered multiple proposals. Management concluded that a sale of AMS to IPG is in the best interest of everyone.
In sum, the deal makes sense all the way around. Maneuvering to obtain access to Acxiom's vast customer data collection expertise makes a lot of sense for an ad agency. The deal allows ACXM's fast growing LiveRamp segment to finally trade on its own and probably to garner a higher multiple. Also, the all-cash transaction unlocks immediate value for Acxiom shareholders and enables Acxiom to return capital through an accelerated and expanded ongoing share repurchase program.
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