blinkx Make a Run at Miva

8 August, 2008


blinkx have announced they have made a $41 million cash offer for Miva, which represents a 54% premium above the $0.78 closing price of Miva stock yesterday.  As Miva has $20 mill cash in the bank, as this price blinkx would actually only be paying $21 million.

Miva was a combination of eSpotting and FindWhat and at one time would have been considered by a few as being on the edge of getting into the Premiership of PPC ad networks.


Miva have turned down the unsolicited offer but with Miva announcing their Q2 results today, AdViking states the obvious and say’s it’s only a matter of time before this deal is done.

Miva announced their Q2 results on Monday.  Revenue was $30.2m for the quarter, down from $32.7m year on year.  Which was a EBITDA loss of $5.2 million.  And cashflow dropped down to $17.2 million.

Why Should I Care About this Deal?

On the surface (e.g.:  Miva announcing staff cuts), this could just appear some consolidation but few points make it interesting.

blinkx are a British company, spun out of Autonomy, and to date are considered a video play (video search engine and contextual video advertising platform).  Cross-Atlantic traffic going from the Old World to New is a bit different and thankfully (and this is good based on what AdViking has heard from Miva insiders about the state of the Miva technology), PiperJaffray analyst Rajeev Bah also thinks this is about getting in some additional revenue and advertisers from a pure-Search network.

Blinkx’s proposed bid for Miva has the potential to significantly change the shape of the business, marrying Blinkx’s advanced search and ad-matching capabilities to Miva’s material base of search-based advertising revenue

For a lot of people (like AdViking contributor and ex-eSpotter, A Fuller View on the Miva Blinkx Deal and Motley Fool’s Rick Aristotle Munarriz) who have been following the fall from great height of Miva since 2005, having this deal done will bring some needed closure.

Offer Letter

Here’s the offer letter:

August 8, 2008

MIVA, Inc.
5220 Summerlin Commons Boulevard
Suite 500
Fort Myers, FL 33907
Attention:     Peter Corrao, CEO
Larry Weber, Chairman
Members of the Board of Directors

Dear Ladies and Gentlemen,
Re: blinkx and MIVA Combination

I am writing on behalf of the board of directors of blinkx Plc to make a proposal for the business combination of blinkx and MIVA. Under our proposal, blinkx would acquire all of the outstanding shares of MIVA common stock for $1.20 in cash per share. Our proposal is not subject to any financing condition. The transaction would be funded from existing cash resources of the two companies.
Proposal. Our proposal represents a 54.0% premium above the closing price of MIVA common stock of $0.78 on August 7, 2008, and a 36% premium over the average closing price for the one month prior to August 7, 2008.
By whatever financial measure one might use, we believe this proposal represents a compelling value realization opportunity for your shareholders and the quickest and most secure way to see such value, particularly given the several challenges MIVA faces in the near term, including: risk and cost associated with the new technology platform, a deteriorating cash position, continued deterioration of the Media EU business and continued decline in revenue and profitability.
We believe that MIVA’s shareholders would not be well-served by any delay in negotiating or completing the merger process, and that time and/or another round of restructuring plans will not significantly increase MIVA’s valuation.
Background. Having worked together for a number of years you will be aware that blinkx is the world’s largest and most advanced video search engine. Founded in 2004 by Suranga Chandratillake, the company completed a successful IPO on the London Stock Exchange (AIM) in May 2007 and currently has a market capitalization of approximately $160 million, with headquarters in San Francisco, CA and the UK. With an index of over 26 million hours of searchable video and more than 350 media partnerships, including national broadcasters, commercial media giants, and private video libraries, blinkx has cemented its position as the premier destination for online TV. blinkx pioneered video search on the Internet, enhanced by $150 million in R&D over 12 years, and is now protected by 111 patents.
Rationale. blinkx believes that a combination of the two companies would be mutually beneficial to both companies’ shareholders, employees, and customers. blinkx and MIVA have complementary businesses that could benefit greatly from blinkx’s technology and MIVA’s distribution network.
blinkx has worked with MIVA as a customer and partner for a number of years and has a great deal of respect for MIVA’s success in building a global keyword advertising network and growing the MIVA Direct consumer offering. We believe, however, that with the Internet’s continued progression towards rich media and newer forms of advertising, more advanced technology will play a fundamental role in achieving success.
blinkx already has in place a proven and growing video-driven revenue engine, and enjoys an unrivalled technology portfolio which is applicable across many aspects of the online market. A combination of the two companies – fusing MIVA’s advertising network with blinkx’s ability to leverage its technology portfolio into the online market – presents an exciting and compelling opportunity.
Specifically, blinkx’s advanced and scalable matching technology will enable immediate platform improvements for MIVA. As a result large portions of relevant search traffic from MIVA’s search ad network will be monetizeable at higher rates through blinkx’s technology. Furthermore blinkx’s technology holds the potential to build on MIVA’s existing toolbar network, adding the latest functionality and an entirely new revenue stream. Finally, MIVA’s consumer sites and portals, that already attract large audiences, will immediately benefit from blinkx’s advanced video technology and AdHoc advertising platform.
Process and Employees. We would value the opportunity to further discuss with you how to optimize the integration of our respective businesses to create a leading global technology company. We believe that the management and employees of MIVA are critical to realizing a successful transition and foresee an important and central role for MIVA employees in the combined company.
Any acquisition of MIVA would be subject to the opportunity to conduct a limited confirmatory due diligence investigation, the negotiation of a definitive merger agreement containing customary terms and conditions, including customary conditions to closing; no material adverse change to MIVA’s business; appropriate shareholder approvals; and any regulatory requirements. Given our participation in the industry and MIVA’s public status, we envisage an efficient due diligence process appropriate to a public company. We are prepared to deliver a draft merger agreement to you and begin discussions immediately.
Due to the importance of these discussions and the value represented by our proposal, we expect the MIVA Board to engage in a full review of our proposal and discussion of its contents with MIVA’s shareholders. We are prepared to meet at a time and location of your convenience to complete due diligence and commence definite agreement negotiations.
We believe this proposal represents a unique opportunity for MIVA’s shareholders to realize value, and the combined company will be well positioned for future growth. We hope that you and your Board share our enthusiasm, and we look forward to a prompt and favourable reply.
Yours sincerely,
Suranga Chandratillake
CEO and Founder

This communication does not constitute, or form any part of, any offer for, or any solicitation of any offer for, securities or the solicitation of any vote for approval in any jurisdiction