KIT digital Acquires Video Asset Management Solutions Provider, Brickbox Digital Media
Kit Digital (MM) (NASDAQ:KITD)
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2 Months : August 2010 to October 2010
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KIT digital, Inc. (NASDAQ: KITD), the leading global provider of video asset management solutions (VAMs) for multi-screen IP-based delivery, has acquired privately-held Brickbox Digital Media s.r.o., based in Prague, Czech Republic, along with its international subsidiaries and affiliates. All currency figures below are in U.S. dollars.
"This was a choice acquisition for us which we had our eyes on for some time, extending our capabilities and commercial reach in premium content management and services for the major and 'mini-major' Hollywood studios," said KIT digital's chairman and chief executive officer, Kaleil Isaza Tuzman. "For the last two decades, the Czech Republic has become a global knowledge center for audio-visual engineering, with a history of production, post-production, graphics and special effects work with major studios. Brickbox has been a leader in the market through much of this period, focusing on digital cinema services and master video file management solutions. In many respects, the acquisition of Brickbox Digital Media completes the circle on our decision in early 2009 to move our corporate headquarters to Prague, and underlines our commitment to building a global leader from the heart of Central Europe."
Brickbox Digital Media is one of Europe's leading providers of traditional and next-generation digital video asset management solutions. The company serves as an intermediary between content owners and distributors, offering products and services that include mezzanine file management, localization, digital cinema mastering, and authoring of media for replication. Brickbox uses order scale across regions to realize cost efficiencies for a global client base, which also requires outsourced replication, packaging, and distribution to the physical point of sale. Brickbox primarily serves European distributors out of its Prague headquarters and back-office operations in Sofia, Bulgaria, with sales and account management offices in Los Angeles, London and several locations in Central and Eastern Europe (CEE). Brickbox manages its business through international subsidiaries and affiliates, such as International Digital Management in the U.S., in order to comply with local employment and content rights regulations.
Based on recently closed August results, Brickbox and its affiliates derive approximately $12 million in annualized revenues, with an estimated $1 million in standalone profit over the trailing twelve months. Based on pro forma synergies and associated integration and restructuring expenses, KIT digital expects the acquisition to be accretive on both a revenue and operating cash-flow basis.
KIT digital paid upfront consideration of approximately $10.1 million (after working capital adjustment and $1.0 million hold-back related to consolidation of Brickbox's minority interests), comprised of approximately $6.6 million in cash and 339,476 shares of KIT digital common stock. KIT digital also agreed to pay the shareholders of Brickbox consideration equal to 10% of forward revenues from Brickbox over a four-year period, subject to a $20 million annual revenue threshold for each year and certain profitability thresholds. This earn-out consideration may be paid in cash or stock at KIT digital's election, with the stock portion of consideration valued using a 30-day volume weighted average price of KIT digital common stock on each of the four anniversaries from closing, subject to a $10 price floor. The transaction involves customary escrows against representations and warranties, and all stock issuances associated with the transaction are subject to 15-month lock-up provisions to help ensure management's long-term commitment and upside in the combined business.
Petr Stránský, chief executive officer of Brickbox Digital Media, commented: "KIT digital was the right strategic move for us and we are excited to be teaming with the global leader in video asset management solutions, particularly given KIT digital's experience serving network operators and broadcasters who have a pressing need to offer premium film content to their respective client bases. Our collective strengths should yield exceptional value and unique benefits for our combined global customer base. Given Brickbox's longstanding relationships with production studios and content distributors, we think the sales synergies between our companies are powerful. KIT digital truly understands the meaning of end-to-end IP video workflow, and how to serve the complex environment of enterprise video management."
Brickbox has approximately 85 employees in its main Prague and Sofia offices, with additional business development and account management staff in the U.S., UK, Bulgaria, Hungary, Poland, Romania and Slovakia. Brickbox clients include Arrow Films, Eagle Rock Entertainment, Momentum Pictures, 20th Century Fox Entertainment, Warner Home Video, Universal Studios, and numerous European content distributors, including Bontonfilm and Monolith Video.
"Joining with Brickbox increases our reach and delivery capabilities across the CEE region," said Jakub Kabourek, KIT digital's head of Central and Eastern Europe for KIT digital. "Our combined strength should continue to attract the highest quality clients and the best technical talent in the region."
KIT digital closed the acquisition of Brickbox on September 21, 2010. The company expects there will be modest restructuring and integration expenses related to the acquisition, totaling approximately 20% of the original purchase price over time.
Pro forma of the issuance of common shares and cash outlay related to the purchase consideration as well as restructuring and integration charges, KIT digital estimates it will have approximately 24.0 million shares outstanding, and hold in excess of $46 million in cash and equivalents.
About Brickbox Digital Media s.r.o.
Brickbox Digital Media is a leading provider of master studio services and file management solutions for the purposes of digital cinema delivery, digital distribution and localization. The company's solutions cover the entire content management lifecycle, from ingestion, digitization and mezzanine file management to processing, authoring and securing content for replication and physical distribution. Founded in 1999, Brickbox's clients include Arrow Films, Eagle Rock Entertainment, Momentum Pictures, 20th Century Fox Entertainment, Warner Home Video and Universal Studios. Brickbox is headquartered in Prague, Czech Republic with satellite operations in Sofia, Bulgaria and sales offices and subsidiaries in the U.S., UK, Hungary, Poland, Romania and Slovakia. For more information, visit www.brickboxdigitalmedia.com.
About KIT digital, Inc.
KIT digital (NASDAQ: KITD) is a leading global provider of video asset management solutions (VAMs) for multi-screen IP-based delivery. KIT VX-one, the company's family of end-to-end software platform solutions, enables enterprise clients to acquire, manage and distribute video assets across the three screens of today's world: the personal computer, mobile device, and IPTV-enabled television set. The application of VX ranges from commercial video distribution to internal corporate deployments, including corporate communications, human resources, training, security and surveillance. KIT digital's client base includes more than 1,000 customers across 40+ countries, including The Associated Press, Best Buy, Bristol-Myers Squibb, Disney-ABC, FedEx, General Motors, Google, Hewlett-Packard, Home Depot, IMG Worldwide, ESPN Star, MediaCorp, News Corp, Telefonica, Verizon and Vodafone. KIT digital is headquartered in Prague, and maintains principal offices in Atlanta, Beijing, Boston, Buenos Aires, Cairo, Cambridge (UK), Chennai, Cologne, Delhi, Dubai, Kolkata, London, Melbourne (Australia), Mumbai, New York, Singapore, Stockholm and Toronto. For additional information, visit www.kitd.com or follow the company on Twitter at www.twitter.com/KITdigital.
