News Corp to Buy Owner of MySpace.com for $580M
NEW YORK – News Corp. (NWS) on Monday said it would buy Intermix Media Inc. (search) , owner of the popular MySpace.com social networking site, for $580 million in a move to expand the media conglomerate's Internet offerings.
News Corp. is the parent company of the Fox News Channel, which operates FOXNews.com.
The deal comes after News Corp., home to the Fox television network, Fox News and 20th Century Fox film studios, announced on Friday the creation of an Internet division to hold the company's sports, news and entertainment sites.
News Corp. will pay $12 a share, a 12 percent premium over Intermix's closing price on the American Stock Exchange (search) on Friday. Intermix shares rose 9.5 percent to $11.74 in Monday trading.
"For a company with a market capitalization of over $50 billion and $6 billion in cash on their balance sheet, to pay $580 million for the fifth most widely viewed domain, that strikes me as reasonable," said Natexis Bleichroeder analyst Alan Gould.
"With a significant amount of advertising dollars moving from traditional outlets to online, News Corp., like most media companies, is looking to boost its Internet assets," Gould added.
Online advertising is expected to be the fastest growing category for national advertisers, up 15 percent to $7.9 billion this year, according to media buying firm Universal McCann.
MySpace.com is the most popular of the once-trendy social networking sites, which allow people with common interests to seek dates, friendship and professional relationships.
Google Inc. (GOOG), for its part, has a social networking site called Orkut. Yahoo Inc. (YHOO) has made social networking a part of its Yahoo 360 networking tool.
"The thing about MySpace is that it's a growing audience," said Jupiter Research analyst David Card. "Its users are pretty loyal. They get a lot of time spent on their pages. And the personal information they get from users is pretty reliable because they want to meet people. One would think this information would be pretty useful to advertisers."
Intermix, which had $24.1 million in revenue in its fiscal fourth quarter, will become part of News Corp.'s newly created Fox Interactive Media.
News Corp. had said on Friday it plans to make "strategic investments" in this area. The creation of the Internet unit comes three months after News Corp. Chief Executive Rupert Murdoch's exhortation to the newspaper industry that it was too slow to respond to the Internet.
Intermix was the target of a lawsuit by New York State Attorney General Eliot Spitzer (search), who accused the company of false advertising and deceptive business practices in bundling hidden spyware that delivered pop-up advertising and redirected Web traffic to an Intermix search engine.
The company agreed to pay $7.9 million to settle suit without admitting wrongdoing. It had previously stopped distributing such programs.
The News Corp. deal is expected to close in the fourth quarter of calendar 2005.
Intermix's largest shareholder, VantagePoint Venture Partners, which holds 22.4 percent of the company, has agreed to vote its shares in favor of the deal, News Corp. said.