Excite@Home buys Bluemountainarts.com for $780m

Acquisition gives Excite a Web reach of about 34 percent, a 40 percent boost from prior levels.

It didn't take online greeting cards site Bluemountainarts.com too long to find a buyer. Excite@Home said Monday it would acquire Bluemountainarts.com from Blue Mountain Arts Publishing for $780m (£468m) in cash and stock.

The deal, expected to close by the end of the year, comes just days after a Wall Street Journal report said Bluemountainarts.com was on the auction block, scrapping plans to go public. That report, however, put eToys as the most likely buyer for Bluemountainarts.com.

Under the terms of the agreement, Excite@Home will issue 11 million shares, valued at approximately $430m, and $350m in cash. Excite@Home will assume all outstanding employee options. If Bluemountainarts.com reaches traffic, reach, and other performance targets over the holiday season, Excite@Home may issue an additional $270m in shares.

The acquisition of Bluemountainarts.com -- the 14th largest site in terms of traffic -- gives Excite@Home's narrowband Excite portal a much-needed traffic boost. Excite@Home said the acquisition gives Excite a Web reach of about 34 percent, a 40 percent boost from prior levels.

Excite traffic averaged 89 million page views a day in September, slightly higher than analyst expectations and up about 10 percent from the second quarter. Registered users jumped to 44 million, up 16 percent from the second quarter. That growth, however, has lagged behind other portals such as Yahoo!

The company said Bluemountainarts.com can make the narrowband side of the Excite@Home equation more sticky. Bluemountain.com has 65 percent of the electronic greeting cards market and can boost Excite's ability to monetize traffic.

Excite@Home also said it can use Bluemoutainarts.com to expand e-commerce opportunities with its Matchlogic direct marketing unit. Currently, Excite@Home's @Media unit, which includes Excite and Matchlogic, accounts for about 60 percent of the company's revenue. The @Media division also generates subscribers for the @Home cable access service. In its third quarter, the company said Matchlogic has 72 million profiles, up from 65 million in the second quarter.

"Excite@Home plans to leverage the Bluemountain.com audience reach and page views almost immediately to create more Excite@Home registered users, broadband subscribers and, ultimately, revenue," the company said.

In tandem with the acquisition, Excite@Home inked distribution agreements with Proflowers.com, Dan's Chocolates, a former subsidiary of Bluemountain.com, and Lucidity. The trio will pay Excite@Home a combined minimum of $34m in advertising fees over three years. "For Excite@Home, this acquisition promises to be a significant platform for future growth in both narrow and broadband content to generate increases in registered users, @Home broadband subscribers and revenue," said George Bell, president of Excite@Home.