SAN FRANCISCO—Frankly, maker of a disappearing chat app, is buying WorldNow, the online and mobile news content platform used by CBS, Fox, ABC and other major broadcast groups across the country, for $45 million in a stock and cash transaction.
Frankly is buying the outstanding shares owned by WorldNow founder, Gary Gannaway. Frankly intends to combine it’s mobile messaging with WorldNow’s news content “on one platform, increasing its user engagement, traffic and monetization. In addition, Frankly will be acquiring Worldnow’s content platform with more than 100 million monthly active users and 450 customers.”
Worldnow provides the platform for local broadcasters to create websites, apps and other digital properties used to distribute and manage online content, with an advertising platform as part of the core offering. It generates revenue through long-term licensing agreements on its news platform as well as through digital advertising. Worldnow’s revenue and EBITDA has grown steadily in the past five years, reporting $26 million in revenue and $6.5 million in EBITDA in 2014, Frankly said.
Steve Chung, founder and CEO of Frankly, said, “This transaction provides immediate scale for our business, adding a sizable user and customer base, an industry-leading advertising platform and a source of stable revenue and EBITDA.”
Founded in 1998 by Gary Gannaway, Worldnow has more than 90 employees working in its New York office. Frankly cited comScore in saying that Worldnow is one of the top 20 most-visited news/information network of sites in the United States. Frankly is a venture-funded start-up-turned-pubic company. Trading of Frankly stock (TSX-V: TLK) on the TSX-Venture exchange commenced in January of this year and raised “$26 million at $3.05 a share,” the company’s website states. Frankly Chat is said to have been downloaded more than 2 million times, “and is focused on user privacy by offering ephemeral messages with unsend capabilities.”
Under deal terms, Frankly will pay $10 million in cash and $20 million in Class A voting shares to Gannaway Entertainment, Inc., Raycom, Liberty TV Group and two minority shareholders who will receive cash only, and another $15 million in cash one year from when the deal closes. The transaction leaves Raycom with 21.2 percent of the company.
Lou Schwartz, chief strategy officer of Worldnow and principal of Schwartz & Associates, which has a managed services agreement with WorldNow, will receive $400,000 in Class A Shares and another $700,000 in connection with the transaction.
Subject to approval from Canada’ s TSX-Venture Exchange and upon the closing of the transaction, Frankly will appoint Joseph G. Fiveash, III, vice president of Digital Media, Strategy and Business Development of Raycom, as a member of Frankly’s board of directors and Lou Schwartz as president of the Media Division of Frankly. Upon the appointment of Fiveash as a member of Frankly’s board of directors, Jung Woo Sung will step down as a director of Frankly.
It is expected that Inna Vartelsky will assume the position of global controller, John Wilk will assume the position of general counsel, and Craig Smith and Melissa Hatter will each assume positions equivalent to senior vice presidents of the Worldnow business unit.
Beacon Securities Limited is acting as financial advisor to Frankly and Fasken Martineau DuMoulin LLP and Reed Smith LLP are acting as Frankly’s legal counsel.
Frankly is funding the transaction in part with a $10 million credit facility backed by JJR Private Capital Limited Partnership. Ronald D. Schmeichel is a director of Frankly and principal of JJR, thus the loan, according to Frankly, “is not subject to the formal valuation requirements and the transaction is also exempt from the minority approval requirement, as neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the credit facility, insofar as it involves interested parties, exceeds 25 percent of Frankly’s market capitalization. The closing of the transaction remains subject to TSX-V approval and, to the extent required by the TSX-V, approval of Frankly’s shareholders.
Summary Financial Information of Worldnow
Income Statement Data (US$)
Year Ended
2014
Total Revenues
$26,455,220
Total Expenses
$24,617,482
EBITDA
$6,492,995
Net Income
$1,837,738
Balance Sheet Data (US$)
As at Dec. 31,
2014
Total Assets
$17,726,209
Total Liabilities
$14,583,938
