Digitas Buys Pharma Agency

Betting on the growth of health-related online marketing, Digitas on Tuesday said it will acquire an interactive agency, Medical Broadcasting Company, with a client roster that includes AstraZeneca, Bristol-Myers Squibb, and GlaxoSmithKline.

The deal is expected to close by March, at which time Digitas will make an initial payment of $30.4 million--$22.4 million in cash and $8 million in Digitas common stock. MBC could receive additional payouts over the next three years, based on performance.

MBC co-founder Linda Holliday said the company sought out Digitas because of clients' growing interest in online marketing.

"We see our clients taking online spends from 3 to 5 percent up to 20 to 30 percent over the next couple of years," said Holliday, adding: "We expect within the next five years that online will make up the majority of their spend."

David Kenny, CEO of Digitas, said that MBC's clients were a large reason for the deal. "MBC has a client list to drool over," Kenny said.

The privately held MBC has existing relationships with eight of the top 10 pharmaceutical companies ranked by worldwide healthcare revenue, according to a Merrill Lynch report issued after Digitas' announcement. The report predicted that MBC will complement Digitas, one of the largest publicly traded interactive agency holding companies.

Digitas, which already counts Pfizer and Wyeth as clients, will give MBC the ability to scale on a major level, according to Digitas' Kenny.

MBC, which will remain a separate entity, plans to add 140 employees. MBC co-founders David Kramer and Linda Holliday will remain with the company for no less that two years, per the terms of the acquisition.

MBC said it is profitable, and expects revenues of $23 million to $25 million for the year ending Dec. 31, 2005.

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