Team Internet Group plc (LON:TIG) has announced it has entered into a definitive agreement to acquire the entire issued share capital of a leading online marketing business, Shinez I.O. Ltd and its subsidiaries from its current shareholders.
Business Profile
Shinez specialises in the production and promotion of highly engaging content across diverse channels such as social media, search engines, and native networks. Its currently forty popular portals include ourfashiontrends.com, falafelandcaviar.com and travelerdreams.com. Leveraging this expertise, Shinez monetises real-time visits through an expansive network of advertising exchanges, utilising cutting-edge technology and strategies. This approach maximises the revenue potential of each piece of content, and positions Shinez at the forefront of digital marketing innovation.
Acquisition Terms
Team Internet will acquire Shinez for an enterprise value of USD 41.8 million, on a net debt free basis and subject to customary adjustments for net working capital, payable in cash.
The initial consideration represents a multiple of 4.0x Shinez’s FY23 Adjusted EBITDA. Additional contingent consideration of up to USD 12.3 million will be due subject to Shinez achieving ambitious financial targets over the next two years, payable in cash.
Pro Forma Impact
Shinez reported USD 111 million in gross revenue USD 17.2 million in net revenue and USD 10.4 million in Adjusted EBITDA for the year ending 31 December 2023. Following the acquisition, the enlarged Group’s unaudited pro forma financials for 2023 indicate an estimated gross revenue, net revenue and Adjusted EBITDA of approximately USD 948 million, USD 208 million and USD 107 million, respectively. Moreover, this acquisition is expected to significantly enhance earnings per share (EPS), with a forecasted adjusted EPS growth in the high single-digit percentage range for the pro forma fiscal year 2023, not accounting for potential synergies.
Funding
The acquisition will be funded through a combination of cash reserves and the Revolving Credit Facility Agreement.
USD 4.6 million, i.e. 11% of the enterprise value, will be retained in escrow for four years to cover for customary warranties and indemnification. A graduated release schedule is planned for the escrow: up to 50% will be released on the second anniversary of the transaction’s completion, followed by releases of up to 25% each on the third and fourth anniversaries.
Strategic Benefits
· Diversification: Shinez’s distinctive content creation and syndication prowess, complemented by a balanced mix of organic and paid content promotion strategies, extends our reach into lucrative, underserved verticals such as Lifestyle, Food, and Travel, among others. This strategic expansion not only diversifies our portfolio but also unlocks new advertiser budgets, significantly enlarging our Total Addressable Market (TAM).
· Reduced Monetisation Network Concentration: The strategic acquisition of Shinez marks a significant shift in our monetisation network concentration. On a FY23 pro forma basis, this acquisition would more than double the Online Marketing segment’s revenue generated independently of our Tier 1 channel partner. Specifically, it elevates the segment’s independent revenue share from 15% to an impressive 27%. On a group level, the independent revenues increase from 33% to 41%.
· Enhanced Capabilities: Merging Shinez’s expertise in media buying, content creation, and campaign optimisation with TIG’s existing expertise will significantly strengthen our business model.
· Synergy Opportunities: We anticipate significant growth and revenue synergies, including reciprocal cross-selling to and from Shinez’s and TONIC’s publisher bases and deeper vertical integration with major networks, in particular Meta.
Completion Timeline
The Acquisition is expected to complete by late April/early May 2024, with all closing conditions anticipated to be satisfied, with the first full consolidation in Q3 2024.
CEO’s Perspective
Michael Riedl, CEO, commented:
“This acquisition marks a pivotal transformation for Team Internet Group, seamlessly aligning with our innovative OM2 vision – Omni-Media, Omni-Monetisation. Our vision is to establish a versatile platform that expertly guides internet users across diverse media landscapes (Omni-Media) and steers them towards the most effective monetisation avenues (Omni-Monetisation). The addition of Shinez’s capabilities and market reach will not only diversify our revenue streams but also accelerate our growth trajectory. We are excited about the prospects this partnership brings. We welcome the Shinez team to the Team Internet Group.”
