Digitas Stock Falls on Modem Acquisition News

BOSTON Digitas stock closed the day on the Nasdaq at $8.05, down $1.78 or 18 percent, following news this morning that it plans to buy Modem Media in a stock-for-stock transaction valued at $200 million. Earlier in the day, the digital- and direct-marketing shop’s shares (DTAS) fell to $7.35.

Modem Media’s stock (MMPT), meanwhile, rose $1.12 or 26 percent to close on the Nasdaq at $5.42.

The Modem Media acquisition, due to close in the fourth quarter, will bring 270 staffers and clients like Home Depot and Heineken to 1,200-employee Digitas, which has accounts like AT&T and American Express.

“The combination of Digitas and Modem Media brings together two innovators who share a passion for helping clients win,” said David Kenny, chairman and CEO of Boston-based Digitas. “As complementary pioneers who’ve been leaders in defining interactive and database marketing, together we offer an even stronger value proposition to our clients.”

Modem Media will continue to operate under its name, and will be led by Martin Reidy, currently president of Digitas in San Francisco. Marc Particelli, Modem Media’s existing president and CEO, said, “I will continue to lead the business in the near term and will support a period of integration as long as it is necessary,” but declined to elaborate.

Modem Media offices will be led by their current managing directors: Michael de Kare-Silver in London, David Lynch in Norwalk and Scott Sorokin in San Francisco. The companies expect to merge Digitas’ San Francisco and London offices into the Modem Media outposts in those locations.

Digitas and Modem share several key clients, including America Online, Delta Air Lines and General Motors. A conflict of note: Digitas works with Microsoft and Modem Media handles some IBM business.