In August 2021 Finfeed changed from a website that covered ASX listed news to a website
that covered a select range of ASX
listed small cap Biotech stocks that we are personally invested in: find out more.
The old Finfeed website, and all of the old articles are kept here for record keeping purposes.VISIT NEW SITE
engage:BDR to acquire US business AdCel & raise $2M
4 minute read
engage:BDR (ASX:EN1) has this morning announced it has signed a binding Term Sheet to acquire 100% of the shares in US-based digital media and advertising company AdCel Inc.
The acquisition is subject only to formal due diligence which is expected to be completed within 30 days.
EN1 will acquire AdCel for US$4.5 million, stipulated payable in fully paid shares in engage:BDR Limited to be issued to the vendors at the equivalent of $0.22 cents per share, and USD $1 million in cash.
EN1 expects the proposed acquisition to immediately add A$2 million in revenues in the first full year after completion of the acquisition and to deliver up to A$5 million in additional revenues to the company in the first full year. These estimations are reliant on the company’s ability to increase its client integrations from 86 to 126 in the near-term.
The transaction will also deliver over 6000 applications to the combined entity, which should increase EN1’s advertising inventory available for sale.
In addition to this news, the company also announced it is undertaking a share purchase plan (open to institutional and sophisticated investors) to raise A$2 million, to fund the acquisition and for provide working capital. The SPP will comprise the issuance of 12,500,000 fully paid ordinary shares at a price of $0.16 per share.
Why the AdCel acquisition makes sense for EN1
Adcel Inc is a digital media and advertising company offering a solution to a problem faced by App publishers — the fact it is generally difficult for an individual App publisher to earn significant revenue from their particular App.
AdCel enables that ad inventory to be aggregated thereby delivering a larger, more attractive audience to advertisers. The solution enables App publishers to capture advertising revenue across numerous small apps — considering that ad features are one of the primary ways for App publishers to make money from Apps, AdCel provides a crucial service.
By acquiring AdCel, EN1 will almost immediately be able to increase its current integrations to 126 and add over 6,000 exclusive new apps to its publisher supply portfolio. AdCel has a considerable pipeline of additional integrations which should also add considerably to EN1’s revenues for the year. In fact, AdCel’s 2018 standalone revenue projections see the company set to exceed A$2 million in the 2018 calendar year.
Yet EN1 does remain a speculative investment and investors should take a cautious approach to any investment decision made with regard to this stock.
To date EN1 has integrated 86 clients onto its proprietary programmatic platform, with a further 15 clients expected to be integrated by the end June 2018.
In addition, the acquisition will enable EN1’s current publisher suppliers to also buy access to Adcel’s existing 40+ buyers, and lead to a multiplier effect on revenue with the increase in the number of publishers onto which the company can sell inventory.
Taking the benefits of the acquisition into consideration, EN1 expect to increase its revenue by approximately A$5 million+ over the proceeding 12 months, and result in total revenues approaching A$30 million.
The key terms of the acquisition are as follows:
- Payment of US$1.0 million in
cash payable on completion
- The issue of approximately
21,179,309 fully paid ordinary shares in engage:BDR Limited at a deemed issue
price of A$0.22 cents per share (US$3.5 million). The shares are proposed to be
issued in accordance with the company’s 15% placement capacity under ASX
Listing Rule 7.1.
In commenting on today’s major news, EN1 CEO Ted Dhanik said: “engage:BDR is extremely positive about the acquisition of AdCel. AdCel has a number of extremely positive attributes that make it an attractive acquisition. It has a business which will grow engage:BDR’s customer reach significantly, including many customers which are the crème de la crème of the industry.
“engage:BDR is very pleased that the shareholders of AdCel have agreed to accept most of the purchase consideration for the business in shares in engage:BDR Limited at a premium to the IPO price of $0.20 cents which demonstrates their confidence in the engage:BDR business and its future prospects. The shareholders of AdCel have also agreed to voluntarily escrow their shares for periods ranging from 6 to 12 months from completion of the transaction.”
EN1 to raise funds towards acquisition
In order to meet the agreed cash component of the proposed purchase price of AdCel, EN1 also announced it is undertaking a share purchase plan through Lead Manager Sanlam Private Wealth.
The company has received binding commitments for a share placement to a range of institutions and high net worth individuals of 12,500,000 fully paid ordinary shares to raise A$2 million at a price of $0.16 per share.
In addition, EN1 included in today’s announcement its intention to immediately undertake a share purchase plan for existing eligible shareholders at the same price to raise up to a maximum of a further A$2 million. According to the company, the SPP available to existing shareholders should provide funds sufficient to get the company to a cash flow positive position during the 2018 calendar year.