TIDMKAPE
RNS Number : 4075R
Kape Technologies PLC
08 March 2021
This announcement contains inside information
8 March 2021
Kape Technologies plc
("Kape," the "Group" or the "Company")
Acquisition of Webselenese
Highly strategic acquisition bolsters Kape's go-to-market
capabilities
Kape (AIM: KAPE), the consumer-focused digital privacy and
security business, announces the acquisition of Webselenese Ltd.
("Webselenese"), a digital platform which provides independent and
highly valued consumer privacy and security content to millions of
users globally via market leading review sites . The total
consideration for the acquisition is c. US$149.1 million (the
"Acquisition") on a net cash basis.
Highlights
-- Provides Kape with one of the broadest audiences for consumer digital privacy and security
-- Deepens Kape's go-to-market capabilities and ensures Kape is
ahead of the market in consumer trends providing a competitive
edge
-- Brings Kape closer to the consumer - unrivalled insights and
expertise will support Kape's product development roadmap
-- Key pillar in Kape's strategic roadmap to become a world
leader in consumer digital privacy and security
-- Highly accretive acquisition with adjusted EPS increased by
65%, accelerates Kape's earnings growth with the enlarged group
expected to generate on a reported basis 2021 revenues of
US$197-202 million and adjusted EBITDA of US$73-76 million*
* Consolidating Webselenese as from the 5 March 2021, being the
deal's closing date
Ido Erlichman, Chief Executive Officer of Kape, commented:
"The acquisition of Webselenese is highly strategic for Kape,
providing us with one of the most respected and far-reaching
consumer privacy and security content businesses globally. By
combining this deep level of consumer knowhow with our fast-growing
product footprint, we believe the acquisition will be a force
multiplier for Kape in our product development and customer
reach.
"This significantly earnings accretive acquisition accelerates
our strategic objective of becoming the go-to brand for consumer
privacy and security globally."
Ran Greenberg, and Ariel Hochstadt, Co-founders of Webselenese,
added:
"After working with Kape over the last few years we are excited
to join forces to create a company which will be able to deliver on
its promise to promote and provide digital privacy and security to
consumers worldwide."
Investor and analyst audio webcast
Kape Technologies plc will today host an audio webcast for
analysts and investors at 12.30 p.m. GMT. In order to join, click
on the below link.
Audio webcast:
https://webcasting.brrmedia.co.uk/broadcast/6040d3091e24d464e23e7dae
About Webselenese
In the last ten years, Webselenese, which is based in Tel Aviv
has built up an independent privacy and security focused content
platform that attracts over eight and a half million unique monthly
readers(1) in over 30 languages, with a particularly strong
readership in North America. It has become a leading destination
for consumers looking to understand consumer privacy and security
trends in the digital world, as well as being an important platform
for brands to reach relevant consumers. Webselenese's unique
insight driven content platform, together with its proprietary
technologies and knowhow, has become an important platform to reach
relevant consumers.
Webselenese's mission is to provide honest and unbiased
information via its well-regarded websites that have received
thousands of positive user generated reviews. Webselenese was
founded with the goal to provide best in-class consumer focused
privacy and security related news and product information to users
across the globe. Its team of researchers extensively research and
test every product before reviewing and recommending it, in doing
this, Webselenese only recommends products and services that its
writers would use themselves, providing it with a key competitive
advantage that has attracted a range of featured vendors (including
Kape, McAfee, NortonLifeLock and Dashlane).
Through its global infrastructure, Webselenese has built a
unique insight-driven content platform specifically designed to
attract readers organically with over 105 million readers in 2020.
This knowledge and technology will provide Kape with a unique
competitive advantage in growing sales of its product suite.
Webselenese has a track record of significant organic growth,
and in the year ended 31 December 2020 generated unaudited revenues
of c. US$64.5 million, an increase of 91% (2019: US$33.8 million)
and unaudited EBITDA of c. US$30.7 million, up 204% (2019: US$10.1
million).
The Acquisition is a key strategic milestone in positioning the
Company as the go-to brand in the global consumer privacy and
security arena and seeks to build on an existing partnership that
has been in place for a number of years. Webselenese's unrivalled
level of market understanding and consumer feedback will support
Kape's ongoing product development and organic user growth.
The business is wholly owned by co-founders Ran Greenberg and
Ariel Hochstadt and has 29 employees together with hundreds of
dedicated service providers, primarily writers, around the
world.
(1) Average monthly readership in 2020
Transaction rationale
Kape anticipates that the Acquisition will support and improve
the Group's organic growth prospects in the fast-growing consumer
digital privacy and security markets through:
-- Elevating Kape as a leading force across the global consumer privacy and security arena
o The Acquisition provides access to one of the broadest
consumer privacy audiences globally. Webselenese attracted over 105
million readers in 2020 across a high growth sector and grew its
readership by 62% compared to 2019
o Webselenese is a key educational platform, supporting Kape's
mission of providing the best digital privacy and security
solutions for consumers
-- Supporting Kape's product and broader software portfolio development
o With such a broad reach, Webselenese will provide Kape with
valuable insights, trends and feedback from which to focus the
Group's product development efforts
-- The enlarged group benefitting from Webselenese's highly attractive financial profile
o Webselenese is highly cash generative, with 96.6% operational
cash flow from net profit
o The Board expects the enlarged group to generate in 2021, on a
full year pro-forma basis, revenues of between US$208-213 million,
and Adjusted EBITDA of between US$78-81 million
o On a reported basis as from the date of closing, the enlarged
group is expected to generate 2021 revenues of US$197-202 million
and Adjusted EBITDA of between US$73-76 million
-- Retaining Webselenese's highly experienced management team
o Co-founders Ran Greenberg - an entrepreneur with extensive
expertise in building digital businesses; and Ariel Hochstadt - a
former Google executive with vast experience in consumer buying
behaviours - will continue to run Webselenese's operations with
complete editorial independence along with their highly skilled
team, expanding Webselenese's activities within the security
space
o Ran Greenberg and Ariel Hochstadt will together hold 5.44% of
Kape's shares immediately following the Acquisition
Transaction summary
Kape will acquire Uma Capital Ltd and Ani Ariel Ltd, which are
the owners of Webselenese, for a total consideration of c. US$149.1
million (the "Consideration") to be satisfied by a combination of
c. US$116.6 million in cash and c. US$32.5 million in new shares,
amounting to 12.1 million Kape ordinary shares ("Consideration
Shares").
Out of the cash consideration Webselenese's founders will use
circa US$1.34 million to purchase Kape Shares in the market
following the close of the transaction.
The cash element of the Consideration will be funded through a
combination of US$32.5 million of Kape's own cash resources and
US$85 million) drawn down under a US$120 million bridge facility
(the "Bridge Loan") made available by TS Next Level Investments
Limited, an affiliate of Unikmind Holdings Limited, Kape's majority
shareholder
Following consent received from Kape's existing lender group
(the "Banks"), the Company's existing US$40 million term facility
and US$10 million revolving credit facility will remain in place
and available. Under the terms agreed with the Banks, Kape has a
period of 90 days to agree a new upsized facility to refinance the
Bridge Loan in full, absent which the existing term facility and
revolving credit facility will become repayable. In such
eventuality, the remaining US$35m available under the Bridge Loan
will be drawn and, together with Kape's own cash resources for the
balance, will be applied to repay the Banks in full. Further
details of the Bridge Loan, which is a related party transaction,
are set out below. The Bridge Loan has been entered into in order
to facilitate timely completion of the Acquisition.
Kape intends to re-finance the Bridge Loan with new facilities
from the Banks as soon as practicable. The Company expects net
leverage to be circa 1.6x pro forma for the Transaction. It is the
Company's intention to
maintain low levels of financial indebtedness.
Kape intends to report Webselenese as a separate division going
forward.
Notice of General Meeting
In order to obtain shareholders' authority to issue the
Consideration Shares, a circular containing notice of a general
meeting of the Company will shortly be sent to shareholders. The
circular will include resolutions to authorise the directors of the
Company to issue the Consideration Shares and to refresh the
directors' general authorities to allot shares and to issue shares
for cash consideration other than on a pre-emptive basis. Unikmind,
which has an interest in approximately 64.3 per cent. of the issued
share capital of the Company , has provided an irrevocable
commitment to vote in favour of the resolutions to be proposed at
the general meeting.
The general meeting timing will be announced in due course, with
the Consideration Shares then expected to be issued the following
day.
Related Party Transaction
Kape has entered into a binding commitment letter with TS Next
Level Investments Limited ("TSNLI") under which TSNLI has
committed, subject to limited conditions, to provide to Kape the
Bridge Loan of up to US$120 million in aggregate.
The Bridge Loan will carry a fixed coupon of 6.0% per annum
payable on funds drawn and an arrangement fee of 1.0%. The Bridge
Loan is subordinated to Kape's existing bank facilities and is
repayable no later than 31 December 2021 (which may be extended to
30 April 2022 at the sole discretion of Kape). The Bridge Loan may
be repaid at any time in whole or part by Kape without penalty. The
Bridge Loan is currently unsecured, but in the event that it is
still outstanding after 90 days, customary security over the shares
held by Kape in KLTM5 Holdings Inc., UMA Capital Ltd and ANI Ariel
Ltd will be granted to TSNLI. The Bridge Loan also includes certain
customary obligations on Kape in relation to TSNLI's costs and
expenses and in relation to taxes.
The independent directors of Kape (being for this purpose Don
Elgie, Ido Erlichman, Moran Laufer, David Cotterell and Martin
Blair) consider, having consulted with the Company's nominated
adviser, that the terms of the Bridge Loan and the related security
are fair and reasonable insofar as the Company's shareholders are
concerned.
Enquiries:
Kape Technologies plc via Vigo Communications
Ido Erlichman, Chief Executive Officer
Moran Laufer, Chief Financial Officer
Shore Capital (Nominated Adviser & Broker)
Mark Percy / Toby Gibbs / James Thomas / +44 (0)20 7408
Michael McGloin 4090
Stifel Nicolaus Europe Limited (Joint Broker)
Alex Price / Brad Topchik / Alain Dobkin +44 (0) 20 7710
/ Richard Short 7600
Vigo Communications (Financial Public Relations)
Jeremy Garcia / Antonia Pollock +44 (0)20 7390
kape@vigocomms.com 0237
About Kape
Kape is a leading 'privacy-first' digital security software
provider to consumers. Through its range of privacy and security
products, Kape focuses on protecting consumers and their personal
data as they go about their daily digital lives.
To date, Kape has over 2.5 million paying subscribers, supported
by a team of over 350 people across eight locations worldwide.
Through its subscription-based platform, Kape has fast
established a highly scalable SaaS-based operating model, geared
towards serving the vast global consumer digital privacy
market.
www.kape.com
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END
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