XLMedia plc acquires ExciteAd Digital Marketing for up to $19M

XLMedia, a provider of digital performance marketing services, has acquired ExciteAd Digital Marketing Ltd (EDM), a leading social and mobile gaming marketing company, for a consideration of up to US$19 million in cash and shares. The acquisition is expected to be immediately earnings enhancing.

EDM, which trades under the name “DAU-UP” (www.dauup.com), specialises in social and mobile advertising specifically targeted at ‘user acquisition’ for social gaming applications. EDM’s principal geographical market is the US, in addition to other English and German speaking markets. EDM provides marketing services primarily to game developers in social and mobile platforms for either a performance based fee, such as CPI or cost per installation, or a management fee based on marketing spend.

For the 12 months ended 30 June 2014, EDM delivered revenues of $12.8m and profit before tax, excluding share based payments, of $3.0m (Management accounts, Non GAAP). EDM was established in 2010, is based in Israel and employs 27 staff.

Social Gaming, which involves playing online games (such as Casino themed, strategy and adventure based) on social media or community sites, is experiencing significant increased demand across web, smartphones, and tablets platforms. According to market specialists Technavio, the demand for these games is expected to continue to see continued growth with an estimated CAGR of 24% in the US alone between 2012 and 2016. This strong growth is driven by the tremendous demand in the mobile and smartphone markets and the free availability of many of these games.

Key Terms

XLMedia will acquire (on a debt free cash free basis) the entire issued share capital of EDM from its current shareholders which include Mr.Idan Nizri, the principal shareholder, founder and CEO, as well as other investors for a total consideration of up to US$19 million (approximately £11.4 million). XLMedia will pay US$12 million in cash immediately and two additional payments of up to an aggregate US$7 million will be payable based on EDM’s EBITDA performance during the first and second years after 1 July 2014, 71% of which may (at XLMedia’s discretion) be satisfied by the issue of new ordinary shares in XLMedia. The value of any new XLMedia Shares issued will be based on an agreed trailing average of the closing days trading price prior to election to issue the relevant shares. Each portion of any share consideration will be subject to an appropriate slow release arrangement. Mr. Nizri will remain with EDM for a minimum period of two years and shall be entitled to a seat on EDM’s board of directors.

Commenting on the acquisition, Mr. Ory Weihs, CEO of XLMedia said,

“We are delighted to be announcing the acquisition of EDM, our largest transaction since listing in London. One of the main reasons behind our IPO was to enable the Group to act as a consolidator in highly fragmented markets. Since listing, we have been working hard to execute such deals and are therefore excited to conclude the acquisition of EDM,a global leader in the social and gaming marketing arena.

“EDM represents a highly complementary fit for our business, is immediately earnings enhancing, strengthens our reach in the US, delivers diversification into social gaming and extends our current gambling expertise and customer base. We look forward to working with the EDM team and to continue to execute our stated growth strategy.”

Lemesos, Cyprus & Tel Aviv, Israel

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