Content recommendation startup Taboola has announced it is merging with ION Acquisition Corp, a special purpose acquisition company (SPAC), based on a valuation of $2.6 billion.
Around $509 million will be invested in the startup, of which current shareholders will receive $100 million.
After deducting the costs of the deal, around $389 million will enter Taboola’s coffers, raising its cash flow after the merger to $600 million. The investment amount is being split 50-50 between the SPAC and investors like Fidelity Management & Research and Baron Capital Group. TheMarker first reported the merger between Taboola and ION.
A SPAC is a shell corporation that raises money from investors and then has two years to find a private company to merge with. ION is run by Jonathan Kolber, Gilad Shany, Avrom Gilbert and Anthony Reich. The merger requires approval by company shareholders and is expected to be completed in the second quarter of this year. Taboola’s decision to go public comes four months after a deal with Israeli firm Outbrain, its largest competitor, blew up.
Adam Singolda founded Taboola in 2007. It operates in the field of native advertising, which the company describes as creating ads that are so assimilated into the design of a platform that the ad seems to belong there. The company is managing to compete with behemoths like Google and Facebook, and some major publishers abroad are among its clients. The company’s business model involves profit sharing with publishers, who usually get a 60% cut. Taboola received $1.2 billion in revenue last year, according to documents released to investors, netting $375 million after deducting traffic acquisition costs.
Its data indicates that it benefitted from the coronavirus, growing by 28% last year compared to just 5% in 2019. Company executives expect revenue to grow by 17.5% this year and 16% in 2022.
ION manages about $1.2 billion, offering one of the largest hedge funds in Israel, two funds focusing on technology and one focusing on startups it identifies as having untapped growth potential. The fund has invested in companies like SimilarWeb, BlueVine, Fiverr, Infinidat and Monday.com.
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For Taboola, the merger process with a SPAC is faster than normal and allows it certainty in receiving a valuation. The reason is that SPACs have no need to try to convince many investors to invest in the company, only the SPAC managers who negotiate the conditions.
In the past, companies that merged with SPACs were struggling to have a regular IPO and had a negative image, but last year the number of SPACs soared as well as the amounts that they raised, making it a suitable alternative to a traditional IPO.