Mandalay Digital Group, Inc. (NASDAQ: MNDL), the company empowering operators and Original Equipment Manufacturers (OEMs) around the globe with end-to-end mobile solutions, announced in November that it has entered into a definitive merger agreement to acquire Appia, the leading independent mobile user acquisition network.
Under the terms of the agreement, Mandalay Digital will issue at closing a number of shares and stock options to purchase its common stock equivalent to $100 million less Appia's net debt and transaction expenses (subject to working capital adjustments), at an agreed-upon value for Mandalay Digital common stock of $4.50 per common share. Based on an estimate of Appia's net debt at closing, including transaction fees and expenses, Appia stockholders would receive in the aggregate approximately 19 million shares, representing pro forma ownership of the combined company of approximately 33%. Mandalay Digital is acquiring Appia's equity for $65 million based on its closing stock price as of November 12 of $3.40. Mandalay Digital will assume approximately $10 million of Appia indebtedness, which Mandalay expects to refinance. The transaction, which has been approved by the boards of directors of Mandalay Digital and Appia, is subject to Mandalay Digital stockholder and other customary approvals, and is expected to close in the first quarter of calendar 2015. Mandalay Digital, which operates through its Digital Turbine subsidiary, intends to change its name to Digital Turbine during the month of January 2015 or at the transaction's close if earlier.
“This combination is transformational for Mandalay Digital, and will enhance the combined company's competitive positioning by delivering a superior revenue opportunity for operator and OEM customers,” stated Bill Stone, Mandalay Digital's CEO. “Appia's platform fits hand-in-glove with Digital Turbine's app installations, creating a single marketplace that we are confident expands our global reach, accelerates our growth, and creates a scalable, low-capex business model that will drive incremental EBITDA and free cash flow.”
“As a key Mandalay Digital partner, we have been amazed at the revenue per device metrics from Mandalay's recent operator launches, including Verizon, and could not be more excited to join forces,” stated Jud Bowman, founder and CEO of Appia. “Appia's global reach, industry leading technology and scale, and unparalleled network of advertisers and publishers make us a critical component of Digital Turbine's end-to-end app install platform for operators, OEMs, and advertisers.”
Appia had unaudited revenues of $30 million for the twelve months ended September 30, 2014. The combined company has the opportunity to achieve up to $14 million in revenue synergies during the fiscal year ending March 31, 2016 and thereafter, predicated on Mandalay's achievement of its internal strategic standalone forecast. Mandalay Digital has also identified approximately $2 million in potential annual cost synergies from overlapping campaign management and CPI-infrastructure functions, as well as duplicative corporate headcount. Mandalay Digital expects to achieve gross profit, EBITDA and cash flow growth from the realization of these revenue and cost synergies in fiscal 2016 and thereafter.
Digital Turbine is a champion of the carrier ecosystem in the wireless community, specializing in monetizing mobile content, games, payment, commerce, music, streaming and eBook applications for wireless carriers and OEMs alike. Appia provides the technology, infrastructure, and scale to provide higher lifetime value users for advertisers, while driving positive return on ad spend. Together with Appia, Digital Turbine will offer a complete end-to-end solution for carriers and OEMS enabling them to get the right apps to the right user at the right time.
The expected benefits to Mandalay Digital of the Appia acquisition include:
– Mandalay Digital will own the largest independent app install network
– A global mobile ad network with active campaigns in over 200 countries across Android and iOS;
– Combined access to more than 1,000 campaigns and hundreds of advertisers and agencies, including 60 of the top 100 grossing apps on the App Store and Google Play;
– Rapid integration of Appia's app-install infrastructure into Digital Turbine's existing platform, supporting growth in advertising revenue;
– Expanded, complementary operator relationships, including Telcel Mexico, Claro in South America and Metro PCS in the USA;
– Direct access to leading publishers and advertisers, building a marketplace of scale to leverage advertising opportunities and increase revenue streams for carriers;
– Appia's talent pool with deep expertise, management and capabilities in ad tech to help ensure professional execution;
– Addition of two Appia appointees to the Mandalay Digital board of directors, including Appia's founder and CEO Jud Bowman;
– Highly regarded new shareholders–Appia's long-term strategic investors include Trident Capital, Venrock, DCM, Noro-Moseley Partners, Wakefield Group, Relay Ventures and Eric Schmidt's TomorrowVentures.
“When 86% of the time spent on mobile is on mobile apps, coupled with the multi-billion dollar revenue opportunities generated from app-installs on existing platforms, we believe this acquisition positions Mandalay Digital for significant growth,” stated Mr. Stone. “As Mandalay Digital scales its Ignite and IQ products, acquiring Appia, the largest independent app install network, will enable us to better serve our customers with direct access to inventory and campaigns. App install and ad revenue are Mandalay Digital's fastest growing revenue streams and this acquisition provides the opportunity to continue to build on our current momentum.”
About Mandalay Digital Group & Digital Turbine
Mandalay Digital Group, Inc., through its wholly owned subsidiary, Digital Turbine, provides mobile solutions for wireless carriers globally to enable them to better monetize mobile content. The Company's products include mobile application management through DT Ignite, user experience and discovery through DT IQ, application stores and content through DT Marketplace, and content management and mobile payments through DT Pay. With global headquarters in Los Angeles, and offices in the U.S., Asia Pacific and EMEA, Mandalay Digital's solutions are used by more than 31 million consumers each month across more than 20 global operators. For additional information, visit www.mandalaydigital.com.
About Appia
Appia is the leading independent mobile user acquisition network. Appia has delivered more than 85 million app installs for hundreds of advertisers, including 60 of the top 100 grossing apps on the App Store and Google Play. Appia provides the technology, infrastructure, and scale to provide higher lifetime value users for advertisers while driving positive return on ad spend. In addition, Appia partners with a diverse set of publishers including app developers, mobile websites, and carriers to maximize their advertising revenue. Appia has been recognized for its leadership in the mobile ad tech space by Inc 500|5000, AlwaysOn's OnMobile Top 100 Private Companies, The Wall Street Journal's Top 50 Venture Backed Companies, and The Stevie Award for Most Innovative Tech Company. Appia is backed by leading venture capital firms including Venrock, Trident Capital, DCM, and Eric Schmidt's TomorrowVentures. Currently Appia operates in multiple offices worldwide including San Francisco, Singapore, Durham, Cork, and Mexico City. More information is available at www.appia.com.
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