Digitas Stockholders Unload Shares

BOSTON Digitas on Tuesday said it has found buyers for 20 million shares of its common stock priced at $5.25 per share.

The shares are being offered by Michael Bronner, founder of the Boston-based relationship marketing company, Hellman & Friedman Capital Partners, the private equity investment company that holds a 45 percent stake in the shop, and their affiliates.

About 90 investors, mainly mutual fund companies bought the shares, and the transaction is set to close within a week, said Digitas CEO David Kenny. The identities of the buyers were not immediately disclosed.

The offering had been expected [Adweek Online, July 17]. Hellman Friedman, which initially invested $100 million in Digitas in 1999, is selling 16.7 million of its 26 million shares, decreasing its stake to about 16.5 percent, Kenny said. The San Francisco-based company plans to divest itself of the bulk of its Digitas investment over the next two or three years, since the life of the fund is nearing an end.

Bronner, now chairman of Upromise, the Needham, Mass.-based customer loyalty and college savings program he founded in 2001, is reducing his 8-9 percent stake in Digitas to 4.2 percent by unloading about 3.8 million shares, Kenny said.

The managing underwriters for the offering are Morgan Stanley & Co. and Friedman, Billings, Ramsey & Co.

Digitas shares have traded around $5-6 in recent weeks on the Nasdaq Stock Exchange. The 52-week high is $6.90; the 52-week low is $2.

Digitas recently posted an improved second quarter in which fee revenue remained relatively steady and net profit improved versus the last quarter and year-ago period.

The Boston-based independent, which works for clients like American Express and General Motors, recorded net income for the quarter of $2.9 million, or 5 cents per share. That is a 60 percent boost over net income of $1.8 million, or 3 cents per share, in the prior-year quarter, and 12 percent over $2.6 million, or 4 cents per share, in the first quarter. Fee revenue totaled $51.6 million, up 3 percent versus $50.2 million a year ago and down 1 percent from $52.3 million in Q1. Total revenue, including reimbursable pass-through expenses, was $72.6 million for the second quarter. That compares to $74.3 million in Q2 2002 and $79.2 million in the first quarter of this year.