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Merger Rumors Send 24/7 Shares Up Sharply

Will they or won't they? The markets thinks they may, sending shares of 24/7 Media Inc.up sharply after reports that it is in negotiations to be acquired by rival ad network DoubleClick Inc.

Shares of 24/7 closed Friday up 6 7/8 to 47 3/8 in trading of 3.2 million shares, five times its three-month daily average. DoubleClick itself rose 4 3/4 to 136 5/8.

In July, DoubleClick Chairman Kevin J. O'Connor said the company is seeking to buy more Internet advertising companies to expand ad sales that are now on more than 1,300 Web sites. 24/7 would add about 150 Web sites to broaden DoubleClick's customer base.

"Together, they would be that much more powerful," Dana Serman, an analyst with Lazard Freres & Co., told Bloomberg News. "24/7 has established its own relationships with publishers, which would be important for DoubleClick to have on its own."

The companies themselves have declined to comment. The news was first reported by the online newsletter Silicon Alley Reporter, which said the deal might be valued at $1.5 billion.

It makes sense in many ways, especially in the wake of the recent buying spree by Internet holding company CMGI Inc., which already owns the Adsmart network and profiling firm Engage Technologies. CMGI is acquiring ad network

Flycast Communications, ad server company AdForce and AdKnowledge.

Still, should one believe everything one reads? Not according to an insider at 24/7, who sent IAR an e-mail saying: "Rumors about 24/7 and Double Click have been around for months. We're jaded on them. Considering that I saw and spoke to the brass this week and last week, I have a hard time believing they're in some hotel smoking cigars with DoubleClick."

The rumors have indeed been around; speculation among investors and analysts about a DoubleClick purchase began early this year, analyst Tara Long of C.E. Unterberg Towbin told Bloomberg..

DoubleClick had sales of $80.2 million last year, while 24/7 had $20 million in sales. In the second quarter of this year, DoubleClick had a loss from operations of $5.1 million, or 13 cents a share, while 24/7 had a net loss of $7.2 million, or 37 cents a share.

DoubleClick's shares have risen tenfold this year, enabling it to use its shares as currency for acquisitions. Long said if there is no transaction, 24/7's shares could return to the low 30s.