LONDON (Alliance News) - Rightster Group PLC said Tuesday that it has acquired Viral Management Ltd, and plans to buy Base79 Ltd, funded through a placing to raise GBP42 million, in a move it expects to more than double the number of content partners of its video distribution platform.
Rightster distributes and monetises live and on-demand video content. it expects the acquisitions to help it achieve market leadership in online video, by utilising Base79's position as the largest partner of YouTube outside of North America. Following the deals, Rightster expects to rank as the fourth biggest YouTube multi channel network by audience in North America, and the largest outside of North America.
The company is raising GBP42 million through the placing of 75 million shares at 56 pence each, in part to fund the acquisitions. The company said that the placing price is a 0.9% discount to its closing mid-price Monday. Chad Hurley, former chief executive and co-founder of video hosting website YouTube, will be participating in the placing and joining Rightster's Advisory Committee.
After funding the two acquisitions, the remainder of the money raised will be used for the company's business strategy.
Shares in Rightster were trading up 7.1% at 60.52 pence Tuesday afternoon.
Rightster plans to acquire Base79 for up to GBP50 million, consisting of GBP25 million in cash and a maximum of GBP25 million in new shares based on earn out conditions. Base79 posted a pretax loss of GBP3.7 million for 2013 on GBP3.3 million in revenue.
It acquired Viral Spiral for up to GBP4.1 million, with GBP1.75 million in cash, 950,120 in shares, and a maximum of GBP85 million cash and GBP85 million in shares based on earn out conditions.
Although the company said it is too early to say where specific costs could be stripped out, it thinks there is potential to reduce costs as it integrates the acquisitions.
"There's a lot of revenue synergies available to us, and there's a lot of cost synergies. Now that we're going forward with Viral and Base we don't need to hire as many people as we were going to," Chief Executive Charlie Muirhead told Alliance News.
"Our focus will be on building further revenue growth and increasing the productivity of the teams we've got in place here," Muirhead said.
Rightster said it had continued to see strong growth in its video traffic during the first half of 2014, with average video views up 48.4% compared with the second half of 2013.
The company said that its second generation of software is on track to roll out this year, which will create further efficiencies and deliver new revenue streams.
Rightster was established in 2011, floated on AIM last year, and its house broker Cenkos Securities has indicated that Rightser might move to profit in the next year.
"They've updated and provided additional research today on the company, and as far as I'm aware, that research will show that this deal accelerates our path to profitability, and the expectation is that that would mean profitability next year," Muirhead explained.
Muirhead said the increasing use of online video content, and the comparative complexity of managing online channels compared to other formats, had driven Rightster's rapid growth.
"It's obviously helped that we're in a huge growing market, and people need a lot of help managing their online video and building audiences and building revenues," Muirhead said.
"We're in a very good position to try and achieve our goal of becoming the number one world wide, so the first thing we need to do is continue investing in delivering the best service possible to our clients, and the second thing we're focused on is that we're operating in all of the key growth markets our clients need to have presence and support in," he said.
"I think if we build the best service in the industry, I think there's no reason why we can't get there," Muirhead added.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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