Inuvo, Inc., a provider of artificial intelligence (AI) technology for brands and agencies, today announced that it has entered into a definitive agreement to be acquired by ConversionPoint Technologies, Inc., a privately held eCommerce technology company.
The acquisition will be a cash-and-stock transaction valued at approximately $2.22 per share of Inuvo common stock based on 34,077,624 common shares outstanding and restricted stock units that will immediately vest upon closing. Inuvo shareholders will receive $0.45 per share in cash and stock valued at an estimated $1.77 per share, or approximately$75.5 million in total consideration. ConversionPoint plans to file a Form S-4 with the Securities and Exchange Commission to register the shares of common stock to be issued in the acquisition and intends to file listing applications for the stock with the NASDAQ Capital Market and the Toronto Stock Exchange.
Strategic Rationale for the Acquisition
ConversionPoint is acquiring Inuvo for its patented, AI-driven consumer behavior technology, which leverages machine learning to mirror the way the human brain instantly associates ideas, emotions, places, people and objects. The combined solution is expected to offer large and small businesses a new way to compete more effectively, increase online sales, achieve higher media spend ROI and improve customer lifecycle engagement. This AI-powered platform is expected to create a competitive eCommerce solution for major non-Amazon channels, such as Shopify, Big Commerce, and Walmart.com.
“Amazon controls nearly half of the $450 million in online retail sales in the U.S. thanks to their proprietary data-driven approach to consumer analysis and marketing,“ explained ConversionPoint CEO, Robert Tallack. “Online retailers and brands have been searching for an end-to-end data-driven technology to help provide accurate information they can use to acquire customers. We believe that together our end-to-end, AI-powered, eCommerce platform can offer those capabilities to the online retail channel and the direct channel that the market has been actively searching for.”
ConversionPoint’s current customers include major brands like Canon, Logitech and Nikon, and its technology has been integrated onto online retailer sites like walmart.com and officedepot.com. Current ConversionPoint shareholders include Menlo Ventures, Granite Ventures and IBM. The company was recently named #93 (software) on the 2018 Inc. 5000 list of the fastest-growing companies in the U.S. with audited revenues of $49.9 million in 2017.
According to the CEO of Inuvo, Rich Howe: “With our combined technologies, data sources and industry partners, we will be able to offer an even greater level of eCommerce transparency and sophistication across small, medium and large business segments. We see this combination allowing us to pursue a shared vision of providing more powerful solutions for eCommerce.”
ConversionPoint enhances consumer product experiences, optimizes media spend, enables upsell, and manages fulfillment and retargeting. Inuvo has the industry’s most capable technology for identifying and analyzing consumer behavioral data, along with direct access to advertising inventory from large media and technology partners.
Inuvo is a market leader in artificial intelligence whose goal it is to align one-to-one brand messaging with consumer intent. Inuvo customers include several Fortune 500 companies, major global brands and agencies. It has the world’s most capable technology for identifying and analyzing consumer behavioral data, along with direct access to advertising inventory from large media and technology partners. Inuvo harnesses the power of its patented IP by delivering high performing campaigns reaching audiences that would typically be missed.
“Inuvo’s technology and product offerings makes our combination very attractive in terms of immediate cross-selling opportunities,’ said ConversionPoint CFO, Raghu Kilambi. “The scale of the combined operations coupled with the identified synergies, focused on the eCommerce market, is anticipated to provide attractive upside revenue and margin expansion opportunities as well as a unique capital market story.”
According to Trey Barrett, COO of Inuvo: “We have identified a number of specific near-term opportunities, including upselling Inuvo’s high-margin AI powered IntentKey media to ConversionPoint’s existing enterprise customers and online retail partners. We also expect to reap significant benefits from integrating ConversionPoint’s retail brands into Inuvo’s ValidClick platform, creating a new traffic acquisition source for ConversionPoint clients, and utilizing ValidClick’s advertising inventory throughout our customer experience.”
The combined company’s IP portfolio is expected to include 15 issued U.S. patents and 12 patents pending.
Additional Transaction Details
This acquisition transaction will be effected through a newly created holding company, ConversionPoint Holdings, Inc., where Inuvo and ConversionPoint Technologies will become wholly-owned subsidiaries of ConversionPoint Holdings.
Under the terms of the definitive agreement, ConversionPoint Holdings will issue 0.18877 shares of its common stock for each one share of Inuvo common stock (or approximately 6.4 million shares in total) and will issue cash in the amount of $0.45 for each one share of Inuvo common stock (or approximately $15.3 million in total). ConversionPoint Holdings will issue 0.9840 shares of its common stock for each one share of ConversionPoint Technologies, Inc. common stock (or approximately 15.6 million shares in total).
The $1.77 estimated value per share of ConversionPoint Holdings common stock to be issued in the acquisition is based upon ConversionPoint Technologies’ recent $15 million private offering that valued ConversionPoint Technologies’ common stock at $9.21 per share, resulting in an estimated equity valuation for ConversionPoint Technologies of $146 million.
Following the closing of the transaction, and prior to the issuance of any stock in connection with a financing that is a condition to closing, Inuvo shareholders will own approximately 29% of ConversionPoint Holdings and will have received $0.45 per share in cash, or total cash consideration of $15.3 million.
Inuvo will operate as a wholly-owned subsidiary of ConversionPoint Holdings and is expected to maintain its offices in Little Rock, Arkansas and San Jose, California. ConversionPoint will operate as a wholly-owned subsidiary of ConversionPoint Holdings and is expected to maintain its offices in Newport Beach and Emeryville, California, and Minneapolis, Minnesota.
Robert Tallack, the current CEO of ConversionPoint Technologies, will become the CEO of the combined companies, and Richard Howe, the current chairman and CEO of Inuvo, will become chairman of the combined companies.
The closing of the transaction, which is expected to occur during the first quarter of 2019, is subject to customary and other closing conditions, including a requirement that ConversionPoint raises a minimum of $36 million of gross proceeds from the issuance of equity and/or debt, a portion of which will be used to fund the cash portion of the acquisition transaction, as well as the approval of the stockholders of ConversionPoint Technologies and Inuvo. All of Inuvo’s directors and executive officers, as well as ConversionPoint Technologies stockholders owning 70% of ConversionPoint Technologies’ outstanding shares have signed support agreements in favor of the acquisition.
Upon the closing of the acquisition, ConversionPoint Holdings expects to change its name to ConversionPoint Technologies.
For ConversionPoint Technologies, Troutman Sanders LLP served as legal advisors. ConversionPoint’s financial advisors on the required debt and/or equity financing are expected to include GMP Securities L.P., Beacon Securities Ltd. and Falcon Capital.
For Inuvo, Porter Wright Morris & Arthur LLP and the Pearlman Law Group served as legal advisors. Canaccord Genuity acted as financial advisor to Inuvo.