A Bonanza for Baltimore

Late birthday gift comes up gold

2 sons gave mother a stake in firm now worth millions

Riches

June 25, 2004|By Bill Atkinson | Bill Atkinson,SUN STAFF

About six years ago, Scott and John Ferber gave their mother a belated birthday gift - a nearly worthless stock certificate in their newly formed company, Advertising.com Inc.

Today, Sandra Ferber - and her sons - are multimillionaires.

Yesterday, the little-known Internet advertising company with headquarters in Locust Point agreed to be sold to media giant America Online Inc. for $435 million in cash.

"This is a dream come true," said Scott A. Ferber, 35, who beamed and walked down an office hallway with his brother, bantering with employees and shouting, "Rock the Casbah," from a 1980s song by rock band The Clash. "It is almost surreal."

The deal means the Ferber brothers will collect about $144 million, according to documents filed in May with the Securities and Exchange Commission. And their parents are millionaires, too, though John B. Ferber, 30, declined to disclose how much his mother and father will make from the deal.

"My mom would kill me if I did," said John Ferber, dressed in a blue suit and giddy with excitement. "They are certainly well taken care of."

The Ferbers aren't the only ones to strike it rich with the company's sale, which is to close later this summer.

Advertising.com's 250 U.S. employees - including 175 in Baltimore - hold stock worth about $112 million, contributing to a euphoric atmosphere in the company's trendy workspace in the Tide Point office complex.

"We share the upside with the employees," said Scott Ferber, the company's chairman and chief executive.

John Ferber, vice chairman and chief product officer, said it is "safe to say" there will be some millionaires. One is W. Gar Richlin, a former Alex. Brown Inc. executive who became the company's chief operating officer in 2001. He owns about 3.8 percent of the company worth $15.2 million, according to the May 21 filing.

Besides the employees, Grotech Capital Group, a Timonium-based venture capital firm, and New Enterprise Associates, a Baltimore-based venture capital firm, hold substantial stakes in the company.

New Enterprise has about 1.29 million shares worth about $52 million, and lead investor Grotech holds 2.6 million shares worth about $104.6 million.

Patrick J. Kerins, Grotech general partner, said the firm began pumping money into the company in 1999.

"This was a company that really rose with the bubble," Kerins said. "It survived the bubble's burst and built a lasting business model. I think this merger and acquisition by AOL Time Warner is just indicative of what one of the great media companies in the world thinks about the value they [the Ferbers] created."

Another investor that stands to profit is the state of Maryland, which put about $500,000 into the company. That should bring it a $1.7 million payoff.

It was John Ferber, a graduate of Pikesville High School and Towson University, who planted the seeds for the company.

A computer programming whiz , John Ferber developed an Internet video game called HoverRace. He ended up selling software he developed that placed ads into the game for advertisers for about $50,000. Then he started Instant Access Communications Inc. and created a software product called ClickTracker that tracked and measured sales on Internet sites. ClickTracker became the foundation of Advertising.com.

Scott Ferber was intrigued by what his brother had been up to.

A University of Virginia graduate with a master's degree in engineering from Stanford University, Scott Ferber worked for Procter & Gamble Co. and later at Capital One Financial Corp. in information-based marketing.

He and his brother had long conversations about business, searching for a way to crack the Internet advertising market. The potential was so compelling that Scott Ferber suggested to his brother that they start Advertising.com and quit his job.

One day, the brothers gave their mother a stock certificate as a late birthday present. but she didn't want it.

"Why are you doing this?" Sandra Ferber asked her sons. "We love you," Scott replied.

Advertising.com was rocked by the dot.com collapse in 2000. There were losses and layoffs, but the company survived and last year broke into the black, notching a $12.1 million profit from operations.

"I never thought we were going to fail," said Scott Ferber.

Payday

Here are ballpark estimates of how much Advertising.com executives, investors and employees will make on the AOL buyout at about $40 a share:

Scott A. Ferber $72.4 million Chairman and CEO

John B. Ferber $72.2 million Vice chair, chief product officer

Employees $112 million

Grotech Partners $104.6 million

New Enterprise Associates $51.9 million

W. Gar Richlin, COO $15.2 million

Bruce McLaren $13.5 million Former CEO of U.K. subsidiary

Douglas McFarland $1.7 million Former exec. VP

Frank A. Bonsal Jr. $1.4 million Director

Source: Advertising.com

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