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Why Digital Turbine Stock Popped Today

By Evan Niu, CFA - Feb 26, 2021 at 4:33PM

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The on-device advertising specialist is acquiring AdColony to strengthen its business.

What happened

Shares of Digital Turbine (APPS -3.41%) popped by 14% today after the company said it would acquire AdColony. The deal is expected to bolster Digital Turbine's on-device advertising business.

So what

AdColony is a mobile ad platform that has 1.5 billion monthly active users worldwide. Digital Turbine has agreed to pay approximately $350 million to $375 million, which consists of $100 million in cash at closing, another $100 million in cash six months after closing, and earn-out payments of $150 million to $175 million contingent upon AdColony achieving certain performance targets in 2021. Digital Turbine will fund the deal with cash on hand, as well as borrowings under an existing credit facility.

Blue and green stock chart fluctuating

Image source: Getty Images.

"AdColony saw the secular tailwinds toward mobile, video and high-speed networks like 5G before most and has been able to capitalize on its vision," Digital Turbine CEO Bill Stone said in a statement. "The ability for Digital Turbine to utilize AdColony's unique mobile advertising solutions across our vast device distribution footprint will unlock significant new monetization opportunities for the combined company's platform offerings."

Now what

Digital Turbine did not quantify what types of synergies it hopes to realize from the deal but expects that the acquisition will be accretive to earnings in the first full year after the transaction closes, which is expected to occur in the current quarter. The deal needs to be approved by AdColony parent Otello's shareholders.

"We believe that Digital Turbine, with its extensive global relationships and distribution, will be uniquely positioned to benefit via the seamless integration of AdColony's mobile video advertising expertise and global brand advertiser awareness," said Otello CEO Lars Boilesen.

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Digital Turbine, Inc. Stock Quote
Digital Turbine, Inc.
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