Two weeks after appointing a new CEO, software company Mer Telemanagement Solutions Ltd. (Nasdaq: MTSL) (MTS) is making an important acquisition that will put it into a completely new sector. MTS, which provides software solutions for managing communication company expenses, yesterday announced its acquisition of Israeli start-up Vexigo, which deals with monetization of content for website owners. The price of the acquisition was $4 million in cash, $20 million more in the future, and shares.
MTS had $5.8 million in cash at the end of the third quarter of 2014. The capital market welcomed the acquisition with noticeable enthusiasm, with the MTS share, not usually the focus of much interest, soaring 63.5%. Trading turnover was huge, amounting to 50 times the daily average, and 70% of the company's shares changed hands. At the end of trading, the MTS share wound up at $1.60, reflecting a $7 million market cap.
The main shareholder in the company is chairman Dr. Chaim Mer, and the recently appointed CEO is Lior Salansky. According to the structure of deal, MTS will pay the first $4 million in three payments: $3 million when the deal is completed, and two more $500,000 payments three and six months after that. When the deal is completed, MTS will allocate to the Vexigo shareholders shares amounting to 40% of the merged company's capital. The remaining $16 million of the acquisition price depends on meeting criteria relating to Vexigo's product in the five and a half years following the acquisition. Vexigo was founded in 2010 by CEO Koby Ram and VP R&D Amit Reshef, who will join MTS management.
According to figures from IVC research, Vexigo has raised only $750,000 since it was founded, so its exit is very successful, and also provides it with indirect access to the stock market. Its investors are private investor and company director David Shoshan and FT Investments. The company board of directors also includes former Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR) CEOs Zvika Friedman and Hezi Lapid.
The product developed by Vexigo, Visualizr, although not yet commercial, tailors websites to each reader according to his preferences, and enables advertisers to broadcast advertisements focused on the customer. Vexigo's revenue totaled $6.6 million in the first three quarters of 2014, compared with $3.2 million in all of 2013. Operating profit in January-September 2014 was $2.5 million, and its net profit was $2.2 million. For the sake of comparison, at $5.3 million, MTS's revenue during this period was lower, and in contrast to Vexigo's growing business, MTS's revenue plunged 43%.
Furthermore, MTS had a $1.1 million net loss in the first three quarters of 2014. "We're excited about the acquisition, because we believe that it will benefit our customers, partners, employees, and shareholders," Salansky said. "With the acquisition, we'll have the necessary resources to expand our presence in the market, and the new line of business will diversify our basket of products."
Published by Globes [online], Israel business news - www.globes-online.com - on February 4, 2015
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