System1 Announces Sale of Total Security
System1 an omnichannel customer acquisition marketing platform, announced the sale of Total Security Limited (“Total Security”) to a group led by Just Develop It Limited (the “Transaction”).
The Transaction allows System1 to focus on its core advertising business and positions the Company for accelerated growth powered by its industry-leading Responsive Acquisition Marketing Platform (RAMP). The Transaction also enhances the Company’s financial profile and leverage position, while providing greater financial flexibility to fuel its future growth.
“The sale of Total Security represents System1’s commitment to providing our world-class RAMP technology to powerful brands and delivering high-quality consumers to our advertising partners,” said Michael Blend, System1’s Co-Founder, Chairman & Chief Executive Officer. “The transaction allows us to focus on investing in RAMP, growing our advertising business, and capitalizing on the recent upturn in the online advertising market to drive shareholder value. We thank the employees of Total Security for their hard work and dedication, and wish them well under their new ownership group.”
Tridivesh Kidambi, System1’s Chief Financial Officer, commented, “As we have stated before, we are committed to positioning System1 to take advantage of current trends in digital advertising through our RAMP platform, and believe the financial flexibility created by this transaction will allow us to further those efforts. The new capital will enable us to both continue investing in our core advertising business, while also improving our leverage and liquidity position.”
Transaction Highlights
The Transaction consideration valued at approximately $340 million includes (a) a $240 million cash payment to System1, subject to certain closing adjustments, (b) the assumption and waiver of $60 million of potential earnout payments due to Total Security in connection with the business combination transaction in January 2022, and (c) the transfer to System1 of approximately 29.1 million shares of System1’s Class A common stock held by Just Develop It Limited and related persons with an aggregate value of approximately $40 million as of the closing price on November 29, 2023, representing approximately 25% of the Company’s shares outstanding. The Company will use $51.0 million of the proceeds to repay certain of its outstanding indebtedness.
The transaction was unanimously approved by the non-interested independent members of the System1 Board of Directors, acting upon the unanimous recommendation of a Special Committee of independent directors that was established to evaluate the terms of this Transaction and other strategic alternatives. Additional details regarding the Transaction can be found in the Form 8-K to be filed with the Securities & Exchange Commission (“SEC”) within four (4) business days of the closing date.
Upon completion of the Transaction, Christopher Phillips, the controlling stockholder and director of Just Develop It Limited, voluntarily resigned from his position as a member of the System1 Board of Directors.
Advisors
Solomon Partners served as financial advisor to the Special Committee and Weil, Gotshal & Manges LLP served as legal counsel to the Special Committee. Latham & Watkins LLP served as legal counsel to the Company.
Fiscal Year 2023 Guidance
As a result of the Transaction, the Company is withdrawing its guidance for the second half of fiscal year 2023 which was provided in August of this year.
Share Buyback Authorization
The Company also reconfirmed it still has approximately $24 million remaining on its previously announced Stock and Warrant repurchase program.
