Israeli content recommendation company Outbrain has announced the acquisition of Teads, a prominent player in video advertising solutions, for $1 billion. The seller is French-Israeli businessman Patrick Darhy's media group, which owns the Israeli communications company HOT.
The transaction includes a $750 million cash component, $275 million in stock exchange, and $25 million contingent on Teads' performance post-acquisition. The cash portion will be financed through a loan, likely from institutional entities or via bond issuance. Following the announcement, Outbrain's stock surged 8%
Outbrain will control approximately 60% of the merged entity. Outbrain's CEO, David Kostman, will lead the combined company, while Teads' co-CEOs Bertrand Cassada and Jeremy Arditti will serve as presidents. The Altice Group, Darhy's media conglomerate, will appoint two directors to the combined company's board, one being an independent director. Currently, Outbrain's board has eight members.
Strategic Advantages
Teads specializes in video advertising on content sites and smart TVs, providing ad players that auto-play during site navigation and display contextually relevant ads. This acquisition will give the combined entity access to 20,000 advertisers and 10,000 content websites, reaching over 2 billion users across 50 countries.
The merger aims to leverage the strengths of both companies: Teads’ brand marketing expertise and Outbrain’s performance marketing capabilities. The synergy is expected to boost operational efficiency and profit margins.
Financial Impact
Since its 2021 IPO at a $1.1 billion valuation, Outbrain’s market value has declined, mirroring the broader downturn in digital advertising. However, despite a partial recovery in tech stocks in 2023, digital advertising companies like Outbrain have not experienced the same rebound. Outbrain's stock has increased 10% year-to-date, valuing the company at approximately $240 million, while the Nasdaq index has risen 17%.
The acquisition values Teads at a 4.8x multiple of its projected 2024 EBITDA, compared to the digital advertising industry average of 8. Combined revenues for the merged entity are estimated at $660-680 million in 2024, with adjusted EBITDA between $180-190 million annually.
Financing and Future Prospects
Outbrain has secured a $750 million financing commitment from Goldman Sachs, Jefferies, and Mizuho at an approximate 10% annual interest rate. Teads’ stronger financials, including a $150 million EBITDA, will help the merged company manage the loan's interest payments.
The share exchange aspect of the deal, based on Outbrain’s recent average share price of $4.8, includes 35 million Outbrain shares and a $105 million package of shares with a 10% annual return guarantee. This reflects a $10 per share price for the special shares, signifying the merger’s anticipated future growth.
With plans to maximize new revenue streams and reduce costs, the combined entity expects annual profit increases ure and Financial Detailsof $50-60 million from synergies alone, alongside a projected free cash flow of $150 million, excluding interest expenses.
The acquisition of Teads positions Outbrain for significant growth in the digital advertising sector, combining complementary strengths and expanding market reach.
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