Rediff Acquires Vubites for $3.38 Million

By siliconindia   |   Friday, 12 November 2010, 00:10 IST
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Bangalore:The acquisition of Vubites India, a Mumbai-headquartered television advertising firm promoted by Ajit Balakrishnan,who is Rediff's founder and chairman, has been approved by Rediff.com India's board of directors.The acquisition of a company promoted by the CEO has raised questions on the standards of corporate governance as it's a related party transaction. Vubites was established in February 2007 but commenced operations in July 2010, and has accumulated loans of $2.79 million as of October 2010. Balakrishnan has accepted to investors that Vubites India is 'personally financed' by him. Rediff informed the SEC of the proposed acquisition on October 28, 2010 and proposes to pay $3.38 million for Vubites India. Of the $3.38 million, $3.08 million is being extended as a loan so Vubites can repay its existing loans. Of the balance, $0.29 million will be used to buy back employee stock options and the rest to promoters. Ashok Lalla, President - Digital, Euro RSCG said, 'The acquisition would add a share of the TV ad pie to its portfolio in the short term, and in the long term, video is the future. Balakrishnan is a maverick entrepreneur and may have seen an opportunity before it becomes mainstream.'' "The company has been hunting for a new growth platform which is a little less dependent on the growth of broadband users in India," said Balakrishnan, in a conference call held post the company's second quarter results. "Our board recently approved plans to enter this market through a small strategic acquisition.We will provide further details shortly as we will be seeking shareholder approval given that the acquisition is of a company which I found it and personally financed. Again, while it is a relatively small acquisition, we wanted to ensure our shareholders understand the benefits this deals bring to our company both near and longterm. This is a reason we are seeking shareholder's approval," he said.