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A buyout of Audible Inc. was no surprise to those who follow the online audiobook retailer. But the identity of the buyer caught many off guard. Amazon.com Inc. agreed Thursday to pay $11.50 per share for Audible. Though the deal represents a 23% premium to the target's closing price of $9.33 on Wednesday, its shares traded above $14 as recently as November. Newark, N.J.-based Audible.com offers more than 80,000 programs including audiobooks and spoken-word audio content from news outlets including The New York Times and The New Yorker. But the company relies heavily on revenues it receives from downloads from Apple Inc.'s iTunes, one reason why some analysts expected Apple to buy Audible. In a research report issued after the deal was announced, Merriman Curhan Ford & Co. analyst Richard Fetyko noted that downloads from iTunes accounted for 25% to 30% of Audible's revenues and that most of its customers are iPod users. Fetyko speculated that the Cupertino, Calif., based company could still purse Audible. "We would not be surprised to see Apple make a bid for Audible to preserve its leadership in the online audio content distribution," Fetyko wrote. "There are no alternatives to Audible in the marketplace with any significant scale." In September, Audible said it expected 2007 income of between $6.8 million and $7.5 million on revenues of $106 million to $108 million compared to a loss of $1 million on revenues of $82 million in 2006. It ended the third quarter with 455,000 members compared to 345,000 the year before. At 20 times 2008 enterprise value-Ebitda, Fetkyo described the acquisition price as "fair." The transaction complements an acquisition Amazon made last May for Brilliance Audio, a publisher of audiobooks. It was one of only two acquisitions made by Amazon in 2007. It also acquired Dpreview.com, a provider of digital photography reviews and information. Audible shares have been under pressure since December, when private equity firm Apax Partners registered 5.9 million shares, or 23% of the company's stock for sale. In 2003, Apax, along with media firm Bertelsmann AG, invested $6 million in Audible. In conjunction with the investment, Apax agreed to acquire Series A stock in Audible from Microsoft Corp., which used Audible's technology in its Microsoft Reader product. Audible launched its service in 1997, then went public in 1999. It previously had an agreement with Amazon to be the company's exclusive audio download partner. Thomas Kuhn of Allen & Co. was financial adviser to Audible. The company relied on Edwin Martin, Nancy Spangler, John Depke, William Haddad, David Buss, Linda Thomas, Tony Saur, Ruchir Patel and Michelle Pironti of DLA Piper LLP for legal advice in connection with the deal. Lazard's Jeffrey Sechrest and John Gnuse were financial advisers to Amazon. William Regner and Dmitriy Tartakovskiy of Debevoise & Plimpton LLP provided legal counsel.  Deal Video
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