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Capitalizing on hot demand for e-mail marketing companies, e-Dialog Inc. agreed Thursday for GSI Commerce Inc. to acquire it for $157 million in cash and stock. Under the terms, King of Prussia, Pa.-based GSI will pay $147.8 million in cash and $9.2 million in restricted shares of its stock. GSI, which provides e-commerce services for businesses, also will make an additional cash payment of $750,000 in fiscal 2009 if revenue targets are achieved in fiscal 2008. Lexington, Mass.-based eDialog provides permission-based e-mail marketing services for enterprise customers. Among its clients are the National Football League, BMG Music Service, American Eagle Outfitters and SmartBargains.com. The company reported earnings of $6.5 million on revenues of $33.9 million for the 12-month period ending Sept. 30. Jim Matheson, general partner at e-Dialog investor Flagship Ventures, said the company had been "growing very nicely," and could have remained independent or even tested the public markets, but the combination with GSI Commerce made the most sense for all involved. "The process was precipitated by a lot of interest by large parties in the space and we spent a lot of time figuring if it made sense to continue as a standalone property or as part of a larger company," he said. "It came down to a combination of strategy and financial returns for shareholders." E-mail marketers stepped into the spotlight following the initial public offering of Constant Contact Inc. of Waltham, Mass., in October. Last month, another e-mail marketing firm, ExactTarget Inc. of Indianapolis, registered for a public offering. Constant Contact focuses predominantly on providing e-mail marketing for small businesses, while ExactTarget caters to midsized companies. Forrester Research Inc. has predicted that the U.S. e-mail marketing sector will expand from $2.7 billion in 2007 to $4.2 billion in 2010, representing a compound annual growth rate of 9%. Among the companies that compete with e-Dialog are Responsys Inc., Alliance Data Systems Inc.-owned Epsilon Data Management LLC and infoUSA Inc.-owned Yesmail. E-Dialog raised $10.5 million in 2001 from Flagship Ventures, Commonwealth Capital Ventures and Interpublic Group of Cos. Both Commonwealth and Interpublic Group also invested in a previous round. Linda Gridley, Stan Sandberg, Caroline Barker and Edythe Wilson of Gridley & Co. LLC provided financial advice to GSI in the transaction. Louis Goodman, John Alessi and Jane Harper of Skadden, Arps, Slate, Meagher & Flom LLP served as legal advisors. Jason Auerbach, Alexander Hart and Brad Topchik of Jefferies & Co. were financial advisers to e-Dialog in the transaction and Mark Nuccio, Mike Sartor, Laurel Neale, Eddy Vo-Quang, Eric, Elfman and Elisabeth de Fontenay of Ropes & Gray LLP were the company's legal counsel.  Deal Video
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