Digital Generation Systems, Inc. (NASDAQ:DGITD)
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DG Systems, Inc. (Nasdaq: DGIT):
-- Merged Company Renamed DG FastChannel
-- Creates Advertising and Digital Media Distribution Services
Industry Leader with Unrivalled Network Footprint
-- $2 Million of Operational/Cost Synergies Already Have Been
Implemented
DG Systems, Inc. (Nasdaq: DGIT), the leading provider of digital
media distribution services to the advertising and broadcast
industries, announced today that its merger with privately-held
FastChannel Network, Inc. was completed. The merger is valued at
approximately $37.5 million, inclusive of approximately $8.5 million
of FastChannel debt. The new company will be known as "DG FastChannel"
and trade under the symbol "DGITD" on the Nasdaq National market; the
Company's stock symbol will revert to "DGIT" on June 27, 2006.
DG FastChannel provides integrated digital advertising services to
thousands of advertisers, agencies, newspaper publishers and
television and radio broadcasters. These services include: advertising
distribution capabilities for television, radio, and print; online
business intelligence offerings and searchable database of television
advertisements; digital asset management tools for archiving and
collaboration; and media intelligence offerings, which include
broadcast verification. On a combined basis, DG FastChannel generated
2005 revenue of $83.3 million.
DG FastChannel presents the advertising industry with a best of
breed, unified service platform with unparalleled capabilities
combined with the industry's only network capable of handling complex,
sizable HD spots to virtually every relevant media outlet. The
combined company's digital delivery network has unequaled reach in the
United States and Canada including nearly 100% of all television
stations, television and cable networks, cable systems and radio
stations. The Company's media network also includes nearly 7,000
newspapers across North America and enables online distribution of
print advertising. In addition, the combined entity offers multiple
redundant digital pathways featuring both satellite and Internet
delivery.
Commenting on the merger, Scott K. Ginsburg, Chairman and CEO of
DG FastChannel said, "DG FastChannel brings together two entities with
significant advertising and broadcast industry knowledge and a suite
of innovative service offerings and technologies. The merger creates
an industry leading digital media service firm with an expanded market
reach, a marquee customer base, a robust pipeline of new product
offerings, and strong national network penetration. The ongoing
commitment of the DG FastChannel team is to provide an excellent
customer experience. Our personnel, next-generation technologies and
service offerings have positioned us to achieve this goal with each
client interaction."
Reflecting the one-for-ten reverse split of DG System's common
stock effected yesterday, all outstanding shares of FastChannel common
and preferred stock were exchanged for an aggregate 5,206,271 shares
of DG Systems' common stock. The total number of outstanding common
shares of DG FastChannel is 12,628,211.
Mr. Ginsburg continued, "Beyond our improved market position and
industry reach, the merger creates significant opportunities to
extract operational and cost synergies which should allow DG
FastChannel to produce higher returns than either company could
generate independently. We have actively identified cost reductions
across both organizations in parallel with the merger process to
fulfill our goal of offering customers an advanced, cost-effective
means of managing their advertising business and assets."
Update on Operational/Cost Synergies
DG FastChannel expects to achieve approximately $6 million to $9
million in operational synergies by the end of the first full year of
combined operations. The synergies are to be realized through the
integration of each company's management, personnel, operations,
products and facilities and the elimination of duplicative offices,
equipment and resources. Since executing the definitive merger
agreement in December 2005, operating expenses at DG FastChannel have
been reduced by $2 million on an annual basis, principally through
personnel reductions.
The combined company anticipates greater potential for revenue
growth and believes that, given the fixed cost nature of the business,
the economies of scale provided through the merger will enable DG
FastChannel to achieve higher operating margins (before one-time
restructuring costs) than either company would achieve independently.
The Company expects to record one-time restructuring costs in the
second and third quarters of 2006 ending June 30, and September 30,
respectively.
Board of Director Changes
Pursuant to the merger agreement, effective immediately, Lisa C.
Gallagher and William Donner have been appointed to the DG Systems,
Inc. Board of Directors and Cappy R. McGarr has resigned from the DG
Systems' Board. As a result, the DG FastChannel Board of Directors has
been expanded to seven members five of whom are considered
"independent" according to the corporate governance rules of the
Nasdaq Stock Market.
Lisa C. Gallagher, formerly Chairman of the Board of Directors of
FastChannel Network, is currently the Senior Vice President and Chief
Operating Officer of Hawtan Leathers, a privately held manufacturer of
specialty leathers for the garment industry. She previously spent over
20 years as a commercial and investment banker specializing in media
transactions and Internet/Media Convergence at investment banking
firms including Bank of Boston and Robertson Stephens.
Bill Donner, formerly a FastChannel Network Board member, is
currently CEO of MedCommons, a Personal Health Record storage and
transport company. Bill Donner's career has focused on designing,
building, financing and promoting the development of large scale
online transaction processing systems for large user communities.
After a obtaining a BSEE from MIT, he joined Digital Equipment
Corporation and in the early 1980 he formed Precision Business
Systems, a Wall St. based Systems Integrator which was sold to the
Bank of America. He joined the Greenhouse Group, Reuters' corporate
venture capital arm, in 1996. In 1999, he joined Fenway Partners, a
leading NY Private Equity Fund where he led the technology investment
group.
About DG FastChannel
DG FastChannel provides innovative, technology-based solutions to
help advertisers and agencies work faster, smarter and more
competitively. DG FastChannel delivers the standard in Digital Media
services to the advertising, broadcast and publishing industries. The
company utilizes satellite and Internet transmission technologies and
has deployed a suite of digital media intelligence and asset
management tools designed specifically for the advertising industry,
including creative and production resources, broadcast verification,
and digital asset management. The Company has an online media
distribution network used by more than 5,000 advertisers and agencies,
and over 21,000 online radio, television, cable, network and print
publishing destinations. For more information visit www.dgsystems.com,
www.fastchannel.com or www.DGFastChannel.com.
Forward-Looking Statements
This release contains forward-looking statements relating to the
Company, including the expansion of its digital distribution network,
and the demand among certain clients for digital audio and video
delivery services. These forward-looking statements involve risks and
uncertainties, which could cause actual results to differ materially
from those projected. These and other risks relating to DG Systems'
business are set forth in the Company's Form 10-K filed with the
Securities and Exchange Commission on March 28, 2006. DG Systems
assumes no obligation to publicly update or revise any forward-looking
statements.