Outbrain and Teads complete merger, cutting 200 jobs globally
Outbrain and Teads complete merger, cutting 200 jobs globally
The $625 million deal aims to save up to $75 million annually by 2026 through role reductions.
With the completion of the merger between Israeli digital advertising company Outbrain and French company Teads, the merged entity will part ways with about 200 employees, most of them outside Israel.
This move is part of what is known in the business world as the realization of synergies, meaning the elimination of duplicate roles. The companies expect annual cost savings following the merger to reach $65 to $75 million by 2026.
The deal consists of a cash payment of $625 million, $25 million in future payments, 35 million Outbrain shares valued at approximately $169 million at the time of signing, and $105 million in convertible shares above a price of $10. This is a unique transaction structure for the high-tech industry, more reminiscent of a leveraged buyout, which will also give a significant stake in the merged company to the owners of Teads.
Following the deal, the European telecom corporation Altice, the current owner of Teads, will appoint two directors to the company, who will join the eight current directors of Outbrain. To finance the deal, Outbrain secured significant credit from Goldman Sachs, Jefferies, and other banks. The merged company will have 2,000 employees, 20,000 advertisers on its platform, and is expected to reach 2 billion consumers per month.
Although Outbrain is technically the acquiring party, the merged company will be called Teads, maintaining the stronger and more recognizable brand. David Kostman, CEO of Outbrain, will serve as CEO of the new company while also holding the position of chairman at Israeli software company NICE.
Outbrain reported that in the fourth quarter, its last before the merger, it generated revenues of $68.3 million, with projected revenues of $236.1 million for 2024. Teads ended the quarter with revenues of $119.9 million and closed the year with $386.6 million. The French company's adjusted EBITDA is also higher—$122.7 million projected for 2024 compared to $37.3 million for Outbrain. Together, the two companies generate revenues of $623 million and an adjusted operating profit of $230 million.
Outbrain is moving closer to the traditional advertising market with this merger, acquiring a company considered a pioneer in video-based advertising. Outbrain had previously courted Teads, but the talks did not materialize into a deal. Teads was sold in 2017 to Patrick Drahi's Altice Media Corporation for $307 million, but Drahi recently sought to divest non-core assets, creating an opportunity for Outbrain.
Drahi exited the deal with a significant profit, securing $625 million in cash, a 40% stake, two board seats in the merged company, and additional future payments contingent on meeting certain performance goals.
About a year ago, Yaron Galai, founder and co-CEO of Outbrain, stepped down, leaving Kostman as the sole CEO. Galai resigned after Outbrain struggled to achieve significant growth following its 2021 IPO on the Nasdaq, where it was valued at $1.2 billion, subsequently losing nearly 80% of its market value.
