Spark Networks announced it has entered a definitive agreement to acquire Zoosk — which is the second largest dating company in North America. Zoosk has a user base of more than 40 million singles worldwide who send out 3 million messages per day.
And Spark is expecting a substantial margin expansion as a result of this transaction targeting more than $50 million of Adjusted EBITDA in 2020 as the monthly paying subscribers will more than double and exceed 1 million globally across the two platforms. Approximately two-thirds of the combined company’s revenue is expected to be generated in North America — which advances Spark’s goal of building a growing and profitable presence of scale in the largest dating market in the world.
“Zoosk is one of the strongest dating apps in the North American market, which comprises half of the $5 billion global online dating opportunity,” said Spark Networks CEO Jeronimo Folgueira in a statement. “Similarly, North America has been a key strategic market for Spark, and the focal point for our growth initiatives. Our deal with Zoosk creates the second largest online dating platform in North America and the second largest publicly-listed dating company in the world. Over the past 18 months, our management team has successfully integrated acquisitions and developed new brands. As a result of these efforts, our brand portfolio now includes SilverSingles, which continues to exceed our expectations, and the Christian Mingle, Jdate and JSwipe brands, which have all shown significant improvement since they were acquired in late 2017. Our acquisition of Zoosk is the most transformative deal in our history, and we expect the transaction to immediately strengthen our position in the online dating market. With the increased scale that results from the combination, we see a clear path to profitability improvements and greater opportunity to invest in innovation and growth initiatives that will drive shareholder value.”
As part of the agreement, Spark is buying 100% of Zoosk’s shares with a combination of cash and stock at a value of $255 million based on the closing price of Spark Networks SE stock on March 20, 2019. Spark is issuing 12.98 million American Depository Shares (ADSs) valued at approximately $150 million based on its closing price of $11.53 on that date. Zoosk shareholders are going to receive net cash consideration of $95 million at closing and $10 million via deferred cash payments in December 2020 — which is going to be funded through a new $120 million senior secured debt facility.
“We are excited to help create such a broad and powerful portfolio of brands that will address specific user needs in the dating market globally, while leveraging the best of both companies to create a world-class platform to serve customers across these brands,” added Zoosk CEO Steven McArthur — who is joining the Board of Directors at Spark.
This transaction is expected to close early in Q3 2019 subject to the approval of Spark Networks SE shareholders. Over 75% of Spark’s shareholders have committed to vote in favor of the deal and the transaction was unanimously approved by the board of directors at Spark and Zoosk.
Piper Jaffray & Co. was the exclusive financial advisor to Zoosk on the proposed transaction and provided staple financing for the dating service. Fenwick & West LLP was the legal counsel to Zoosk. And Morrison & Foerster LLP served as Spark’s legal counsel led by San Francisco corporate partners Murray Indick and Michael O’Bryan and Berlin managing partner Dirk Besse; and included San Francisco finance partner Dario Avram; tax of counsel Joy MacIntyre; executive compensation of counsel Ali Nardali; New York corporate associate Yohei Nakagawa; San Francisco corporate associates Blair Green, Anisah Giansiracusa, Julia Huang and Connor Acle; and finance associate Mustafa Rizvi.
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