Software company Somoto Ltd. (TASE: SMTO), controlled by Ben Garrun and Eyal Yaakov, signed an agreement at the end of last week to fully acquire Genieo Innovation, an Internet company, for $34.12 million. The proceeds to be paid to Genieo's shareholders include $20 million in cash and the rest in Somoto shares (which will constitute 19% of Somoto's capital after the deal is completed).
Genieo's founders, CEO Sol Tzvi and chairman Jacob Tenenboem, who own 53% of the company's capital in equal shares, will receive most of the acquisition proceeds. A long list of shareholders own the rest, including foreign company Teltora, Comsec Assets, ProSeed Venture Capital Fund (TASE:PRSD), Matrix CEO Moti Gutman, Zvika Barinboim, and Adv. Roni Berkman.
Somoto develops and markets an installation system for monetization tools. Genieo, formerly called Anabel Software, develops artificial intelligence technology for analyzing Internet users' behavior and a focused advertising platform, for which it has registered a number of patents.
According to Somoto's report to the stock exchange, its revenue comes from unique and groundbreaking distribution and monetization based on personalization in a Macintosh environment. The company adds that it contracted a cooperation agreement with Genieo under which Somoto distributed software for end users of Apple Corporation's Mac OS X using Genieo's downloading and installation manager.
Founded in 2008, Genieo's operating profit totaled $1.4 million last year on $5.2 million in revenue from advertising, distribution, and searching. Somoto says that Genieo made a $1.6 million operating profit on $3.5 million in the first quarter of 2014.
The proceeds received by the sellers will be paid in two stages: $12.1 million in cash and $6 million in Somoto shares when the deal is completed (scheduled for August 31 this year), and $16 million nine months after the completion date, composed in equal amounts of cash and Somoto shares. The share price for the initial allocation will be NIS 2, 13% above this morning's market price. The Somoto share price rose 7% later in the day.
Garrun said, "Following the merger, Somoto is expected to double the pace of its sales, while generating significant profits."
At the end of the deal, Genieo will become a fully-owned subsidiary of Somoto, whose market cap after today's rise totaled NIS 80 million. Somoto held its IPO a year ago at a price reflecting a NIS 135 million value, after money, but its share has since lost 30% of its value. As of the end of the first quarter, Somoto had NIS 9.4 million in the bank, after finishing the quarter with a NIS 4 million loss on NIS 16 million in revenue.
Published by Globes [online], Israel business news - www.globes-online.com - on July 27, 2014
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