Sizmek, Inc. – Court Approves Private Sale to Zeta Global Holdings for Consideration that Could Exceed $30.0mn

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April 29, 2019 – The Court hearing the Sizmek case issued an order (i) authorizing the Debtors' private sale of the their Demand-Side Platform (“DSP”) and Data Management Platform (”DMP”) assets to Zeta Global Holdings Corp ("Zeta Global" or the “Purchaser”) for a price consisting of (a) $10.0mn in cash, (b) $2.5mn-$5.0mn in Zeta Global equity and (c) additional consideration keyed off of accounts receivable (eg, at $30.0mn of accounts receivable, the additional cash consideration would be $18.0mn) and (ii) to entry into an asset purchase agreement (the "APA") with the Purchaser in respect of the assets [Docket No. 143]. The Debtors had urged Court approval of the sale, citing the need for speed to save the DSP (and its revenues) from an inevitable shutdown. Complete details as to consideration begins on page 11 of the APA whichis attached to the order.

As previously cited from the sales motion [Docket No. 78], “Starting almost immediately after the Petition Date, advertising inventory supply into the DSP has been declining precipitously. The supply vendors have withdrawn from flowing supply into Debtors’ supply to such an extent that Debtors are not able to participate in the essential programmatic auction process that is the starting point for the eligibility to place advertisements on websites. Presently, very few vendors transact with Debtors to support Debtors’ participation in the programmatic advertising auction process. That being the case, the DSP customers have started to migrate to other providers (Debtors’ DSP product competitors) to support their advertising requirements. In effect, the DSP is moving toward a dry state of being short of threshold levels of advertising to support customer’s advertising inventory needs. Under this state, the DSP is meaningfully loss making, and if this continues, the DSP will quickly need to shut down as it cannot sustain further uneconomic performance. If so, the DSP is essentially shutting down. As a result, Debtors must sell the DSP on an urgent, expedited basis to avoid the complete collapse of the DSP going concern value. If the DSP is shut down or operating at just a fraction of its normal level, for too much longer, measured in days not weeks, advertising customers who are no longer able to place advertising through the DSP will have no choice but to transition wholesale to other providers. Once advertiser customers complete the transition, the revenue from such advertisers that shifts away from the DSP is not likely temporary. As such, the DSP will soon lose its value as a going concern. On the other hand, if the DSP is purchased and business resumes promptly, Debtors’ DSP customer base will remain largely intact and the business will be able to continue as a going concern, enhancing the likelihood that the employees who work on the DSP will continue to be employed.

The value of the DMP is not disintegrating in the same way as the value of the DSP, however, Debtors are also seeking urgent relief to sell the DMP, as selling the DSP and DMP together is likely the best way to maximize the value of the assets. While time will not cause the value of the DMP to diminish, a stand-alone sale of the DSP certainly will.”

Key Terms of the APA:

Purchase Price and Sale of Purchased Assets: The Purchase Price totals approximately $33.0-$36.0mn, consisting of (1) $10.0mn in cash, payable on Closing; (2) $5.0mn in preferred equity; and (3) a share of the future collections on accounts receivable, specifically, (a) 50% of the first $10.0mn; (b) 70% of the second $10.0mn and (c) 60% of all remaining collections (items (a) – (c), together, the “Subsequent Payments”).

Sellers: SIZMEK DSP INC., a Delaware corporation f/k/a Rocket Fuel Inc., X Plus Two Solutions, LLC, a Delaware limited liability company, X Plus One Solutions, Inc., a Delaware corporation, WirelessDeveloper, Inc., a Michigan corporation, Wireless Artist LLC, a Michigan limited liability company.

Purchased Assets: All of each Seller’s right and title to and interest in and to the assets, properties, and rights (contractual or otherwise) owned by such Seller, in each case, which primarily relate to, or are primarily used or held for use, in connection with the Sellers’ business of internet advertising and related managed services under the demand side platform and the data management platform.

Key provisions of the sale guidelines:

Private Sale/No Competitive Bidding: The sale of the Purchased Assets pursuant to the APA does not contemplate an auction or other further competitive bidding process. As described below and in the FTI Declaration and the Company Declaration, an expedited sale of the Purchased Assets to the Buyer provides the best opportunity to maximize value, particularly given the marketing process. The delay resulting from an auction or further bidding process would result in significant value degradation and the failure to achieve a higher or better offer for the Purchased Assets from any other potential purchaser, and the likely loss of Buyer’s offer.

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