KIT digital Inc. acquires ioko365 Ltd for $79.4 million

KIT digital, Inc. has signed an agreement for the acquisition of 100 per cent of the capital stock of San Diego, California and London, U.K. based ioko365 Ltd. KIT digital is a premium software and technology services provider for multi-screen video delivery.

The investment is for a sum potential net consideration of around $79.4 million, including future performance-based incentive payments. ioko provides end-to-end managed cloud-based platform solutions for multi-screen video delivery over connected Internet Protocol (IP) devices to tier-one telco, cable, media and entertainment companies around the world, with a particular focus on North American, Northern European and Australasian markets.

Kaleil Isaza Tuzman, chairman and chief executive officer of KIT digital noted that this transaction represents the culmination of a three-plus year dedicated process to achieve global scope and market share in the IP video platform software sector, both from a geographical and capabilities perspective.

Tuzman said it also represents the successful conclusion of a carefully managed acquisition process for which KIT raised outside equity capital in December 2010, and which necessitated the navigation of complex shareholder and regulatory challenges.

Gavin Campion, KIT digital's president, commented that acquisition of ioko represents a major milestone in achieving the goals the firm originally put forth in 2008. Campion said he believes KIT has now reached a level in the vicinity of its market share target -- making it the far-and-away leader in its market segment -- where economies of scale in client delivery and future R&D are particularly powerful.

ioko's sophisticated over-the-top (OTT) capabilities that allow premium video services delivered over the Internet to be formatted for and presented on televisions and other connected devices, and its closed-network IPTV solutions are expected to add further depth to KIT digital's OTT and connected device platform offerings for its network operator and media and entertainment verticals.

ioko currently generates around $54 million in annualized revenues related to IP video asset management, through a combination of recurring managed service fees, software licenses, maintenance fees and professional services. The company operates profitably with minimal capex requirements, and is expected to contribute in-line to KIT digital's stated 23% EBITDA margin target for fiscal 2011.

The acquisition of ioko is expected to be substantially accretive on both an EBITDA and cash-flow multiple basis.

ioko specializes in large-scale, complex deployments and serves approximately 50 clients, including AT&T, BBC, BSkyB, Channel 4, Diageo, Disney, Electronic Arts, FOXTEL, Evolution Gaming, ITV, Liberty Global, LoveFilm, Molson Coors Brewers, Samsung, SeeSaw, Universal Music, Univision and VimpelCom.

12th April 2011

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