DJ Media and Games Invest signs transforming acquisition of Smaato, a leading digital advertising platform, adding on a pro forma FY 2020 basis 51% revenues and 140% EBITDA to its Verve Group
Media and Games Invest signs transforming acquisition of Smaato, a leading digital advertising platform, adding on a
pro forma FY 2020 basis 51% revenues and 140% EBITDA to its Verve Group
Tuesday, 13 July, 2021 - Disclosure of inside information according to Article 17 of the Regulation (EU) No 596/2014
(MAR)
- Smaato Guidance for FY 2021 has a revenue of EUR 39 million with an expected adj. EBITDA of EUR 13 million, which
represents an adj. EBITDA margin of 33%
- The acquisition of Smaato's programmatic SaaS platform is transformative for MGI's Verve Group adding substantial
revenues and EBITDA
- Smaato is valued at an Enterprise Value (EV) of EUR 140 million
- EV/EBITDA multiple of 10.7x based on 2021 forecast, and 6.8x based on expected results in 2022
- The acquisition will be fully paid in cash
July 13, 2021 - Media and Games Invest SE ("MGI" or the "Company", ISIN: MT0000580101; ticker M8G; Nasdaq First North
Premier Growth Market and Scale Segment Frankfurt Stock Exchange) has successfully entered into an agreement with the
current shareholder of Smaato, Shanghai Qiugu Investment Partnership (Limited Partnership) ("SQI"), to acquire 99.9
percent (which corresponds to all shares of Smaato except for one share) of the shares of Smaato's holding company
"Shanghai Yi Qiu Business Management Co., Ltd." (the "Transaction"), following MGI's earlier announcement of its
intention to acquire Smaato on June 21, 2021. A call option regarding the remaining 1 share is also agreed and can be
executed by MGI earliest from March 31, 2022, and beyond.
Smaato, based in San Francisco and Hamburg, operates a leading mobile first digital Advertising Technology Platform.
Smaato offers its services to publishers on a software-as-a-service ('SaaS') basis. With expected revenues of EUR 39
million in 2021, which represents app. 20% organic growth versus 2020, and an expected adj. EBITDA1 of EUR 13 million
in 2021 (a 33% EBITDA margin), the company is showing a very positive development. Via its platform Smaato reaches over
1.3 billion unique users worldwide every month which will substantially increase the reach of MGI's media segment Verve
Group.
The parties have agreed to an Enterprise Value of EUR 140 million. Based on the guidance for 2021, this corresponds to
an EV/EBITDA multiple2 of 10.7x, based on the guidance for 2022 it would be a multiple of 6.8x. The purchase price will
be paid entirely from existing cash resources. The transaction is expected to close within the next two months,
providing any regulatory approvals have been obtained.
-End of ad-hoc-
Explanatory section
MGI is pursuing a buy and build strategy within the two fast growing synergetic segments media and games. Within the
media segment, under the Verve Group brand, representing 47% of MGI's total revenues in Q1 2021, MGI is building a
global transparent vertical omnichannel programmatic SaaS platform covering the entire value chain in the media sector
between advertiser and publisher. The media offering is highly synergetic to MGI's games activities which are grouped
under gamigo. In addition to organic extensions and growth, MGI is pursuing a clear tick-the-box M&A strategy adding
specific competences as well as scale. With well over 10 synergetic acquisitions in the media segment since 2016 MGI
has already established a strong, fast and profitably growing position in this segment.
The acquisition of Smaato adds a powerful mobile first Supply Side Platform to Verve Group's full-stack suite. The
acquisition of Smaato increases the critical mass of MGI's media segment Verve Group substantially by adding further
advertisers (demand) and publishers (supply) to its platform. Smaato and Verve Group are highly synergetic, which is
expected to lead to cost and efficiency synergies as well as substantial synergies on the revenue side. Moreover, MGI
looks forward to exploring options for strategic cooperation with QS Fund, current general partner of SQI and a
boutique asset management firm in China, on partnership and investment opportunities to extend the market position of
MGI and Smaato in Asia.
TRANSACTION OVERVIEW
MGI Group Pro Forma Financials Full Year 2020 (audited3)
Combined
mEUR MGI Group (IFRS) Smaato (IFRS)
Pro Forma4
Revenue 140 33 173
adj. EBITDA5 29 8 37
adj. EBITDA Margin 21% 25% 22%
Media Segment "Verve Group" Pro Forma Financials Full Year 2020 (audited3)
Media segment Combined
mEUR Smaato (IFRS)
Verve Group (IFRS) Pro Forma4
Revenue 65 33 98
adj. EBITDA5 6 8 14
adj. EBITDA Margin 9% 25% 15% - The Transaction is in line with MGI's defined strategy in the media segment, of seeking highly value-accretive
acquisitions which increase its long-term profitability. Smaato's publisher-focused platform (Supply Side Platform
"SSP") will strengthen Verve's omnichannel vertical SaaS platform on the publisher side. - In addition, MGI expects strong geographic synergies. While Smaato and Verve are both strong in North America and
Europe, Smaato will add substantial assets and revenues in the fast-growing Asian digital media market, which will
be further supported by the partnership with QS Fund. - FY 2021 revenue guidance for Smaato are expected revenues of EUR 39 million and an expected adjusted EBITDA of EUR
13 million, which represents a 33 percent adjusted EBITDA margin. - MGI's combined group adj. EBITDA grows on a pro forma FY 2020 basis from EUR 29 million to EUR 37 million following
the Transaction, the media segments adj. EBITDA grows on a pro forma FY 2020 basis from EUR 6 million to EUR 14
million while the EBITDA margin of the media segment increases from 9% to 15%. - Given the strong base of currently 1.3 billion unique monthly users worldwide, as well as the envisaged strong
synergies, we expect stable and further increasing cash flows by adding further advertisers and publishers to our
media platform. During the course of post-acquisition integration further cost and revenue synergies may be
realized. - The Enterprise Value (EV) of EUR 140 million for Smaato represents an EV/EBITDA multiple of 10.7x based on the
EBITDA-Guidance for FY 2021. Based on growth expectations for 2022, which includes realization of substantial
synergies with Verve Group, the EV/EBITDA multiple is expected to be at 6.8x. The Transaction is immediately
value-accretive for the MGI shareholders based on this multiple combined with an expected increase of Earnings per
share (EPS). - Post-transaction, net leverage6 of MGI will be within the net leverage target ratio of 2-3x adj. EBITDA. - The purchase price will be fully paid in cash at closing. 10 % of the purchase price will be deposited in an escrow
account.
Smaato's Digital Advertising Technology Platform is a cloud-based ad server and monetization solution, all in one, for publishers. Publishers are benefiting from the Smaato platform which allows publishers to create custom-tailored user experience and generate better revenue with ads in apps. Founded in 2005, Smaato is headquartered in San Francisco, California, with additional offices in Hamburg, New York, Shanghai, Pune, Hyderabad, Beijing and Singapore and has app. 150 employees.
Shanghai Qiugu Investment Partnership (Limited Partnership) and its general partner Shenzhen QS Funds Management Co., Ltd. acquired Smaato from its founders and early investors in 2016. Since then, Smaato has invested in further building and optimizing its platform, and organically growing the company. Managed by the general partner Shenzhen QS Funds Management Co., Ltd. ("QS Fund"), SQI and its affiliates focus on investment in the digital marketing industry. Founded in 2014, QS Fund is an innovative private equity fund manager. Its core members have rich experience in capital markets and are committed to the acquisition and integration of high-quality assets worldwide. QS Fund has accumulated a wealth of customer resources in digital media and has established strong collaborative relationships with the relevant market leaders in China. QS Fund also manages investment funds for Chinese insurance companies.
Remco Westermann, CEO Media and Games Invest SE
"This transaction is another important acquisition for MGI and our fourth acquisition this year. After we already doubled revenues (+94%) of MGI's media segment Verve in Q1 2021, Smaato will now on top of this on a FY 2020 pro forma basis add 51% revenues and 140% EBITDA compared to stand-alone numbers of Verve in FY 2020. We expect that this transaction will transform Verve to becoming one of the leading ad-tech players in the open internet worldwide. The envisaged cost and revenue synergies between Smaato and Verve Group, as well as technical innovations and further invest in growth are to ensure the continuance of further strong growth of our media segment. This acquisition is also adding critical mass to our platform by adding a substantial number of strong publishers. It is a transformative transaction for MGI's Verve Group with targeted stable and long-term EBITDA contributions." Notes Note 1) Smaato adjusted EBITDA: EBITDA adjusted for one-time legal and advisory cost Note 2) EV/EBITDA multiple: Enterprise value of EUR 140m divided by Smaato's expected adjusted EBITDA for the relevant period Note 3) Based on audited IFRS statements of Smaato and MGI; please note pro forma statements have not been audited. The numbers added up shall not constitute, and shall not deemed to be, a guarantee of future developments of the business or combined financials. Hence, the actual future financial figures of the combined businesses may significantly deviate from
(MORE TO FOLLOW) Dow Jones Newswires
July 13, 2021 08:33 ET (12:33 GMT)
