Video ad firms forge bigger Google rival with £260m merger

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Two of the London stock market’s leading specialists in the fast-growing video advertising sector are close to joining forces in a £260m merger.

Sky News has learnt that Taptica and RhythmOne are in advanced discussions about an all-share tie-up that would create one of the most powerful independent players in the all-important US market.

Sources said on Tuesday that the deal was aimed at forging a more powerful competitor to Google and Facebook, which are the dominant players in a segment of the advertising market which is a major priority for mass-market consumer brands.

It will be structured as an all-share takeover of RhythmOne by Taptica, whose shareholders will own a slightly larger stake in the combined company despite its lower market capitalisation.

One said the combination would create a business with roughly $700m in revenue, just under half of which would be generated from video advertising activities.

Under their plans, the combined group, which will operate under the Taptica name, will be run by Ofer Druker, who runs Taptica’s US division.

Mr Druker is a 20-year veteran of the fast-evolving sector, and previously ran Matomy Media, another London-listed digital media company.

There is understood to be scope for substantial synergies by bringing the two businesses together, although the precise scale of these was unclear.

RhythmOne is currently without a permanent chief executive.

One insider said the increased scale and profile of Taptica’s video advertising business in the US facilitated by the merger would help to create global opportunities for the company’s sales teams.

The market remains highly fragmented despite a flurry of earlier deals, such as RhythmOne’s acquisition of YuMe a year ago and Taptica’s purchase of Tremor Video in 2017.

The deal, which will be subject to the approval of both sets of shareholders, is expected to be announced later this week.

Even if it is backed by investors, the enlarged Taptica’s presence in the video ad sector will remain a fraction of Google’s.

Taptica brands itself as a “global leader in advertising technologies for performance-based mobile marketing and brand advertising”.

In a stock exchange announcement on 17 January, it said it “remains in discussions with a potential acquisition target” but did not identify RhythmOne.

At Tuesday’s market close, Taptica had a valuation of £115m, while RhythmOne was valued at £147m.

A Taptica spokesman declined to comment, while RhythmOne did not return calls seeking comment.

(c) Sky News 2019: Video ad firms forge bigger Google rival with £260m merger

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