Digitas Acquires Modem Media

BOSTON Digitas today said it has agreed to buy Modem Media in a stock-for-stock transaction.

Based on yesterday’s closing price for Digitas common stock, the acquisition is valued at approximately $200 million on a fully diluted basis, according to Digitas, a Boston-based interactive and direct marketing company with about 1,200 employees worldwide.

Norwalk, Conn.-based Modem has 270 employees and offices in London and San Francisco. Following the merger, Modem Media will continue to operate under its existing name, and will be led by Martin Reidy, who currently is president of Digitas in San Francisco.

Both Digitas and Modem are independent agencies.

“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 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 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 offices in those locations.

“I will continue to lead the business [Modem] in the near term and will support a period of integration as long as it is necessary,” said Marc Particelli, president and CEO of Modem. He did not elaborate.

Digitas and Modem share several key clients, including America Online, Delta Air Lines and General Motors.

Also on Thursday, Digitas said it more than doubled its second-quarter net income to $7.6 million, or 10 cents per diluted share, compared with slightly less than $3 million and 5 cents per share for the same quarter of 2003. Revenue for the quarter was $96 million, an improvement of about 33 percent from the $73 million in revenue Digitas posted for the same quarter a year ago.

Modem also reported its financials on Thursday. The company said its revenue rose to $15.9 million in the second quarter, compared to $15.3 million for the same quarter a year ago. Net income inched up to $1.8 million for the quarter, an improvement of $100,000 from the same period in 2003.