Ad tech company Rocket Fuel has rejected a $US350 million takeover bid for the company made by rival firm Gravity4.
In a letter to Gravity4’s founder and CEO Gurbaksh Chahal, Rocket Fuel’s interim chief executive officer Monte Zweben wrote said the offer was not “credible.”
“We are in receipt of your letter dated May 7, 2015 regarding your proposal to acquire Rocket Fuel. Our board of directors has evaluated your proposal in consultation with its independent advisors and concluded that the highly conditional and non-customary nature of your proposal does not constitute a credible offer.”
Chahal has written and published a detailed response, which can be found here.
Chahal said: “I regret to learn that your board and your independent advisors have hastily concluded that Gravity4’s proposal was too ‘conditional’ and ‘non-customary’ to provide a basis for moving forward,” and goes on to list the potential benefits of working with Gravity4 and its investor group.
Rocket Fuel’s stock price was up 2% at the time of writing.
The original unsolicited, conditional proposal last week came out of the blue. Rocket Fuel’s stock halted trading for a short while after it had been made public. Rocket Fuel’s stocked had jumped as much as 18% in pre-market trading.
In the original offer letter to the Rocket Fuel board, seen by Re/code’s Kara Swisher, Chahal said: “I have observed that Rocket Fuel has hit a road block in this environment, and continues to struggle with its declining gross margins, as evidenced by its recently reported loss of $US13.6 million in Q1, with no guidance as to what the remainder of 2015 holds in store … For Rocket Fuel, the status quo is not an option.”
Chahal is the former CEO of another ad tech company, RadiumOne. He was fired by his board after accusations he had hit his girlfriend multiple times came to light. The prosecution in the case dropped felony charges after Chahal pleaded guilty to two misdemeanours: domestic assault and domestic violence. However, Chahal maintains his innocence.
After unsuccessfully trying to buy back RadiumOne, he went on to start Gravity4. Chahal has previously said his company is valued at $US1 billion. Had Gravity4 had bought Rocket Fuel, it would have been the company’s tenth acquisition to date, although previous acquisitions have been modest, and mostly in stock.
Chahal and Gravity4 are currently facing a lawsuit from Gravity4’s former SVP of global marketing Erika Alonso for alleged gender and age discrimination — and she also claims Chahal illegally spied on her during a job interview. The suit claims Alonso noticed a “constant theme of revenge” directed towards Chahal’s previous company RadiumOne.
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