Kape acquires Israeli co Webselenese for $149m

Ido Erlichman Photo: Sharon Deri
Ido Erlichman Photo: Sharon Deri

The Israeli cybersecurity company is buying the Tel Aviv-based privacy and security startup for cash and shares.

Israeli cybersecurity and privacy protection company Kape Technologies (AIM:KAPE) has announced that it is acquiring Tel Aviv-based consumer focused privacy and security content startup Webselenese for $149.1 million in cash and shares. This is the largest-ever acquisition by Kape, which is controlled by Teddy Sagi.

Webselenese, which was founded by Ran Greenberg and Ariel Hochstadt, has over the past 10 years developed a data driven platform for producing content, which combines an international network of content writers for smart systems, which are engaged in optimizing content. The company specializes in producing content on security and privacy issues and over the past year has registered 105 million readers on its range of sites.

Webselenese has not raised capital from outside sources, and the two founders, Ran Greenberg and Ariel Hochstadt, are the only shareholders in the company. Webselenese has 29 employees in its offices in Tel Aviv as well as hundreds of freelancers around the world. The two founders and the rest of the employees of the company will continue to manage its operations as part of Kape.

Webselenese's founders started out as economists before becoming high tech entrepreneurs. Greenberg served as VP business development for Elron and economics department head at Dun & Bradstreet Israel. Hochstadt was a senior manager at Google and responsible for global marketing of Gmail outside of the US, and regional marketing manager of Google Israel for Greece, and South Africa.

Kape says that the acquisition represents another strategic step for the company and will allow it to move up a gear in terms of expanding its customer base. The acquisition provides knowhow and technology in the field of creating content for quality and focused target audiences, and supports marketing that will produce a competitive advantage in the privacy and security market. In addition, the acquisition provides Kape with significant digital assets in the security and privacy sector. Such a channel will leverage the company's expanding suite of products and assist in the development of new products.

Webselenese has developed a collection of product comparison sites, which offer objective reviews, recommendations, and tips on a broad spectrum of security and privacy tools, which can be purchased online. The company has more than eight million unique visitors each month on its various sites, which are translated into 30 languages. In this way, over the years the company has become a popular address for end consumers on the web.

The acquisition of Webselenese will speed up Kape's organic growth in the digital privacy and security markets, which are growing rapidly, and will represent a major milestone on the way to the company becoming the main address around the world for privacy solutions on the Internet, among other things, by increasing the foothold of the two companies in North America. Webselenese will also assist in speeding up the rate of growth in the profits of Kape due to the swift growth of the company's activities over the past year: Webselenese saw revenue rise 91% last year to $64.5 million (from $33.8 million in 2019) and EBITDA rose by 204% to $30.7 million (from $10.1 million in 2019).

Webselenese has strong cash flow with 96% of EBITDA converted to cash. Together, Kape expects to generate pro-forma revenue of $208-213 million and adjusted EBITDA of $78-81 million in 2021.

Kape is acquiring Webselenese for $149.1 million - $116.6 million in cash and $32.5 million in new shares which will be issued to the shareholders of Webselenese. Kape will finance $35 million for the company and about $85 million of the cash part will be financed by Kape through a bridging loan from the controlling shareholder Teddy Sagi. After completion of the acquisition, Kape will convert the bridging loan to a long-term bank loan, which will set the debt ratio / EBITDA at 1.7, and this ratio is expected to fall to about 1 by the end of 2021.

In October 2019, Kape acquired US company PIA for $130.1 million in cash and shares. PIA specializes in digital data encryption solutions, mainly for privacy on the Internet. Following the acquisition, Kape became the biggest player in the United States and one of the three biggest players in the world in its field.

Kape CEO Ido Erlichman said, "This acquisition is a direct result of our M&A strategy to expand marketing channels in order to support the company's growing mix of products. The target audience that Webselenese brings with it, combined with its knowhow, will place us in a unique position on our way to becoming the main address for digital privacy and security solutions."

Webselenese founders Ran Greenberg and Ariel Hochstadt said, "After working with Kape over the past three years, we are excited to join forces in order to in order to create a company that can keep its promise to promote and to provide privacy and security on the web for consumers around the world."

Published by Globes, Israel business news - en.globes.co.il - on March 8, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Ido Erlichman Photo: Sharon Deri
Ido Erlichman Photo: Sharon Deri
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