What: Shares of social network MeetMe Inc. (NASDAQ:MEET) jumped on Tuesday following the company's announcement that it was acquiring Skout. At 2:45 p.m. EDT, the stock was up about 11.5%.
So what: The deal for Skout values the company at $54.6 million, comprised of $28.5 million in cash and 5.37 million shares of MeetMe stock. Skout generated $23.8 million of revenue in 2015, with 3.5 million mobile monthly active users as of May. Following the close of the deal, MeetMe will boast 8.5 million mobile monthly active users, a 69% increase.
MeetMe expects the acquisition to significantly increase its scale. Revenue for 2016, assuming a closing date of October 1, will be between $70.5 million and $73.5 million. The deal for Skout is expected to be accretive to earnings during the first year following the close.
Now what: MeetMe CEO Geoff Cook expects big things from the combination:
We believe this combination provides a pathway to $100 million in revenue in 2018 with adjusted EBITDA margins approaching 45 percent. I am thrilled to bring two of the largest mobile apps for meeting and chatting with new people into the same portfolio. Skout is among the earliest mobile social discovery services. I've known and tracked the company for more than eight years. We share not only the same vision but also many of the same key engagement metrics, including roughly the same number of chats per user per day, as well as a familiar advertising-driven business model.
2015 was MeetMe's first profitable year, and the acquisition of Skout could make 2016 even better.
Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.