Transaction Provides System1 with $240 Million
in Cash to Invest in Core Advertising Business, Improve Liquidity
& Leverage
System1, Inc. (NYSE: SST) (“System1” or the “Company”), an
omnichannel customer acquisition marketing platform, today
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.
About System1, Inc. System1 combines best-in-class
technology & data science to operate its advanced Responsive
Acquisition Marketing Platform (RAMP). System1’s RAMP is
omnichannel and omnivertical, and built for a privacy-centric
world. RAMP enables the building of powerful brands across multiple
consumer verticals, the development & growth of a suite of
privacy-focused products, and the delivery of high-intent customers
to advertising partners. For more information, visit
www.system1.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release includes “forward-looking statements" within the
meaning of the “safe harbor” provisions of the United States
Private Securities Litigation Reform Act of 1995, particularly any
statements or materials regarding System1’s future results or
“guidance” for fiscal year 2022. Forward-looking statements
include, but are not limited to, statements regarding System1 or
its management team’s expectations, hopes, beliefs, intentions or
strategies regarding the future. In addition, any statements that
refer to projections, forecasts or other characterizations of
future events or circumstances, including any underlying
assumptions, are forward-looking statements. The words
“anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“intend,” “may,” “might,” “plan,” “possible,” “potential,”
“predict,” “project,” “should,” “would” and similar expressions may
identify forward-looking statements, but the absence of these words
does not mean that a statement is not forward-looking.
These forward-looking statements involve a number of risks,
uncertainties (some of which are beyond our control) or other
assumptions that may cause System1’s actual financial results or
operating performance to be materially different from those
expressed or implied by these forward-looking statements. Readers
or users of this press release should evaluate the risk factors
summarized below, which summary list is not exclusive. Readers or
users of this press release should also carefully review the “Risk
Factors” and other information included in our Annual Report on
Form 10-K for the fiscal year ending December 31, 2022, as well as
our registration statements on Form S-1, each filed with the
Securities and Exchange Commission (the “SEC”), as well as
System1’s Form 10-Q’s, Form 8-K’s and other reports filed with the
SEC from time to time. Please refer to these SEC filings for
additional information regarding the risks and other factors that
may impact System1’s business, prospects, financial results and
operating performance.
Such risks, uncertainties and assumptions include, but are not
limited to: (1) the ability to maintain, grow, process, utilize and
protect the data we collect from consumers; (2) the ability to
maintain our relationships with network partners and advertisers;
(3) the performance of our responsive acquisition marketing
platform, or RAMP; (4) changes in client demand for our services
and our ability to adapt to such changes; (5) the ability to
maintain and attract consumers and advertisers in the face of
changing economic or competitive conditions; (6) the ability to
improve and maintain adequate internal control over financial
reporting and remediate identified material weaknesses; (7) the
ability to successfully source and complete acquisitions and to
integrate the operations of companies System1 acquires; (8) the
ability to raise financing in the future as and when needed or on
market terms; (9) the ability to compete with existing competitors
and the entry of new competitors in the market; (10) changes in
applicable laws or regulations and the ability to maintain
compliance with the various laws that our business and operations
are subject to; (11) the ability to protect our intellectual
property rights; and (12) other risks and uncertainties indicated
from time to time in our filings with the SEC. The foregoing list
of factors is not exclusive.
Should one or more of these risks or uncertainties materialize,
they could cause our actual results to differ materially from any
forward-looking statements contained in this press release.
System1’s independent auditors have not audited, reviewed, compiled
or performed any procedures with respect to the forward-looking
statements for the purpose of their inclusion in this press
release, and accordingly, do not express an opinion or provide any
other form of assurance with respect thereto for the purpose of
this press release. System1 will not undertake any obligation to
update or revise any forward-looking statements whether as a result
of new information, future events or otherwise. You should not take
any statement regarding past trends or activities as a
representation that such trends or activities will continue in the
future. Accordingly, you should not put undue reliance on these
statements.
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version on businesswire.com: https://www.businesswire.com/news/home/20231130264165/en/
Investors: Brett Milotte ICR, Inc.
Brett.Milotte@icrinc.com
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