The Sezmi Corporation, the US-based developer of a cloud platform for broadband television broadcast, had its assets acquired by Czech Republic-based video management software provider KIT Digital on December 30th for $27m.
The up front sum of $27m consists of $16m in cash and $11m in KIT Digital common stock. Additionally, earn-out payments could total an estimated $20m to 25m over a period of three years.
Prior to the transaction, Sezmi had raised $112.7m for its video entertainment platform from venture capital (VC) firms Index Ventures, Omni Capital and Morgenthaler Ventures, VC funds Legend Ventures and TDF Fund, and VC investment bank Advanced Equities, according to SEC filings.
However, Sezmi terminated its broadcast service in September after it failed to attract a sizeable customer base, pledging to instead supply its technology to companies looking to provide their own broadband television service.
The deal negotiated by KIT includes 18 Sezmi patents related to digital terrestrial television (DTT) transmission, and KIT expects to see revenues of $20m from Sezmi’s contracted and visible pipeline business this year.
Isaza Tuzman, chief executive officer of KIT, said: "Sezmi spent nearly six years and substantial capital building a team and technology suite that were ultimately a perfect fit for our business model. Importantly, we were able to acquire Sezmi in a way that improves our cash earnings per share and allows us to pay a significant portion of the acquisition consideration out of future operating cash flow."
The Sezmi purchase follows acquisitions of five companies by KIT in the first half of 2011, the most recent being video software company Ioko, for which KIT paid $91m in April.
Tuzman added: "Our normal course of business will continue to emphasise organic growth, while we will be opportunistic and highly discerning in evaluating accretive, complementary acquisitions. We are pleased to have been in a position to complete this acquisition in such a way that improves both our technology and cash-generation profile, while creating long-term value for shareholders."
The news came as KIT announced its intention to move its secondary stock market listing from the Prague Stock Exchange to the London Stock Exchange in the second quarter of 2012, citing a wish to improve liquidity and investor accessibility in Europe. KIT’s primary listing will remain on the NASDAQ Global Market in New York.