Acquisition

RNS Number : 2210N

Taptica International Ltd

07 August 2017

 

The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

07 August 2017

Taptica International Ltd

("Taptica" or the "Company")

Taptica Acquires Tremor Video's Demand-Side Platform

Enhanced offering and US presence with purchase of industry-leading platform for video advertising optimisation and attribution

Further to the announcement of 25 July regarding a potential acquisition, Taptica (AIM: TAP), a global end-to-end mobile advertising platform for advertising agencies and brands, is pleased to announce that it has entered into an agreement (the "Agreement") to purchase from Tremor Video (NYSE: TRMR) ("Tremor" or the "Seller"), a provider of software for video ad effectiveness, its demand-side platform ("DSP"), the Seller's patented auto-optimisation solution for buying effective, programmatic cross-screen video brand advertising. The purchase price amounts to $50.0m with a positive net working capital balance of $22.5m. Taptica intends to fund the acquisition entirely from existing cash resources and a line of credit from HSBC bank.

Rationale for the Transaction

The acquisition is in line with the Company's stated strategy of investing in digital advertising solutions to remain at the forefront of the market and to expand its geographical presence.

·     Diversifies the Company's revenue streams whilst retaining focus on DSP

·     Acquisition expected to be earnings enhancing in FY 2018

·     Significant synergistic opportunity to grow Tremor's video DSP by integrating with mobile alongside data enhancement and thereby reducing operational costs

·     Gives Taptica significant competitive advantage by building a unique offering around next-generation mobile usage, combining mobile, video and social programmatic ad buying platforms for brands and their agencies to ever more accurately target their consumers and users

·     Continuing to build a business that is truly global in scale. This acquisition, added to the recent acquisition of Japan-based Adinnovation, gives the Company a broader footprint in the US and Asia-Pacific - the two standout regions for growth in digital ad spending

·     Taptica will be able to leverage Tremor's established brand awareness in US markets, as well as their excellent client base, introducing its global business and cross-selling to multiply growth opportunities with Tier 1 customers

Terms of the Transaction

Highlights include:

·     $50.0m acquisition of Tremor Video's (NYSE: TRMR) core video DSP business

·     Taptica will receive a net working capital balance of $22.5m at closing

·     Working capital adjustment for the $22.5m of net balance will be finalised in a closing statement no later than 90 days after closing

Funding the Acquisition

Taptica will pay the Seller $30.0m at closing from their own cash resources with the remaining $20.0m committed by a promissory note secured against the Tremor assets that Taptica is buying. Taptica will have 28 days to redeem the note, expected to be met using a new loan facility from HSBC.

The Company has taken a bridging loan from Ehud Levy of $10m with a 5% annual coupon attached (the "Short Term Loan") whilst the HSBC loan is being finalised. The Short Term Loan is for a period of 28 days.

Ehud Levy is the sole beneficial owner of Smart & Simple Ltd, a 10.8% shareholder in the Company and as such, the Short Term Loan is deemed to be a related party transaction under the AIM Rules.

The Directors of the Company consider, having consulted with the Company's nominated adviser finnCap Limited, that the Short Term Loan is fair and reasonable insofar as the Company's shareholders are concerned.

About Tremor Video's Demand Side Platform and Video Market Trends

Tremor Video provides software for video advertising effectiveness. Its buyer and seller platforms enable seamless transactions in a premium video marketplace by offering control and transparency to clients. Its demand-side platform (DSP) is an industry-leading technology stack built for video optimisation and attribution. It has 180 full time employees based in offices across the US and in Singapore. It has 10 years of experience in the video industry and has built a good reputation and strategic partnerships with major ad agencies and leading brand names.

The DSP platform leverages data partnerships to help (mainly US) ad buyers more precisely target consumers cross-screen. It also has the ability to provide independent metrics on number of views, brand safety and audience targeting. Ad buyers can either access it as a managed service or on a self-service basis.

Tremor's DSP revenue* amounted to $115m in FY 2016; EBITDA* for the same period amounted to a loss of $1.3m in 2016. In 2017, the DSP revenue* has grown by 11% to a run-rate of $128m for FY 2017. The Company has identified synergies between the two businesses and has identified cost reduction opportunities via the integration of Tremor's video DSP with mobile alongside data enhancements. The acquisition is expected to be earnings enhancing in Taptica's financial year ending 31 December 2018.

* DSP revenue and EBITDA loss in 2016 are estimated figures extracted from Tremor Video's FY 2016 audited results. DSP revenue for FY 2016 excludes $22m of discontinued business.

* DSP revenue run-rate in 2017 has been estimated from management accounts provided by Tremor Video. Estimated DSP revenue run-rate for FY 2017 excludes $20m of discontinued business.

Video Market Trends

Industry specialist, eMarketer.com, states that US digital video ad spending is expected to grow at double-digit rates into the next decade, reaching $22.18bn in 2021. Alongside this, the Company is also seeing a dramatic increase in subscription-based video services which means that both advertising and consumer spending will continue to increase in the foreseeable future. As the Company saw with the shift to mobile from desktop, it is seeing that the time spent on internet video continues to increase, mainly at the expense of TV time.

Hagai Tal, Chief Executive Officer of Taptica, said: "Taptica continues in its stated strategy of investing in digital advertising solutions and expanding its geographical presence. As well as diversifying our revenue streams, by combining this video DSP business with our mobile and social programmatic ad buying platform, we have given ourselves a huge competitive advantage as we are now able to offer brands and their agencies the ability to ever more accurately target their consumers and users.

"Tremor Video's DSP has an excellent brand name and we will be looking to leverage their established brand awareness in US markets as well as their client base and introducing our global business to them. We look forward to working with their team with the intention to provide the ability to cross-sell across the group and thereby multiplying growth opportunities and building a truly global business."

For further details:

Taptica	[phone]
Hagai Tal, Chief Executive Officer
finnCap (Nomad and Joint Broker)	[phone]
Jonny Franklin-Adams, James Thompson - Corporate Finance Tim Redfern, Richard Chambers - Corporate Broking
Berenberg (Joint Broker)	[phone]
Chris Bowman, Mark Whitmore
Luther Pendragon (Financial PR adviser)	[phone]
Harry Chathli, Claire Norbury

About Taptica

Taptica is a global end-to-end mobile advertising platform that helps the world's top brands reach their most valuable users with the widest range of traffic sources available today, including social. Its proprietary technology leverages big data and, combined with state-of-the-art machine learning, enables quality media targeting at scale. Taptica creates a single arena in which brands can scale and engage more relevantly with mobile audiences, staying ahead of the competition. It works with more than 600 advertisers including Amazon, Disney, Facebook, Twitter, OpenTable, Expedia, Lyft and Zynga. Taptica is headquartered in Israel with offices in San Francisco, New York, Boston, Beijing, Seoul, Tokyo and London. Taptica is traded on the London Stock Exchange (AIM: TAP).

 

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