Abacast Proposes Business Combination With AllDigital Holdings, Inc.
Proposed Combination Believed to Offer the Most Value for Both
Abacast and AllDigital Holdings Shareholders
VANCOUVER, WA -- (Marketwired) -- 01/12/14 -- The following is a
transcript of a letter sent from the Abacast Board of Directors to
the AllDigital Holdings, Inc. Board of Directors:
Dear Members of the Board:
I am writing on behalf of the Board of Directors of Abacast, Inc.
("Abacast") to propose a business combination of Abacast and
AllDigital Holdings, Inc. ("AllDigital"). We believe that a
combination with Abacast will position the combined company for
greater long-term success as a part of a more comprehensive digital
media platform, resulting in greater value and services to your
customers. We also believe it will provide a much more realistic path
to maximize value for your shareholders versus AllDigital continuing
to operate on a standalone basis in light of your status and
As at least some members of the Board are already well aware, Abacast
offers a cloud-based software platform and services to monetize
digital media. Our platform now provides an end-to-end monetization
ecosystem, enabling a marketplace of advertising inventory and
advertising dollars between and among advertisers, broadcasters,
advertising networks, and agencies (the "Clarity Marketplace"). 2013
marked a number of important milestones for Abacast as we began to
realize accelerated growth in the Clarity Marketplace, completed the
transition from and disposal of certain legacy assets and operations,
and truly began to focus our efforts on our platform and core audio
Key metrics and other information directly relevant to our business
in 2013 are as follows: 25%+ total revenue growth; 200+ customers;
90%+ recurring revenue; 70%+ gross margin; cash flow breakeven;
Clarity Marketplace in year 2013 (i.e., 1Q13-4Q13) filled ad
impression and gross ad revenue growth 320%+ and 270%+, respectively
(all amounts currently estimated and subject to audit as applicable).
In light of the initial success of the Clarity Marketplace in 2013
(i.e., yearend traffic levels) and our growing base of recurring
business, we are forecasting organic growth of approximately 50% in
2014. We also recently completed the transition to a Board of
Directors comprised of a majority of outside Directors.
The primary reason Abacast is interested in a business combination
with AllDigital is because of our plan to expand our existing
monetization platform to include video, leveraging the capabilities
and services offered by AllDigital Cloud. Accustream Media estimates
that the online video advertising market represented $10.4 billion in
2013, with spending expected to grow to $16.8 billion by 2015. Our
monetization platform was architected to support the expansion into
video, however, such expansion involves development requirements
around certain video workflow capabilities that we believe are
available in AllDigital Cloud. In addition, we are receiving a
growing number of inquiries from our existing customers for video
workflow, streaming, and mobile application capabilities, each a part
of your core business, and further confirming the value proposition
of a business combination with AllDigital.
While Abacast is extremely interested in a business combination with
AllDigital, we must emphasize that time is of the essence. We are
increasingly concerned about recent developments and an overall
continued lack of market penetration and business progress at
AllDigital. A few examples according to your public filings,
LinkedIn, and other publicly available information include:
-- 15% revenue growth from 2011-2012.
-- Over the past 24 months, 80% of your revenue remains concentrated with
-- Your gross margin has remained at 40% since 2011.
-- Recent departures of multiple personnel, including your COO & CFO
-- There has been no announcement about a replacement for your CTO for
almost two months.
-- Who owns and is actively working the day-to-day development of your
AllDigital Cloud platform?
-- Recent claims of breach, damages, reserved rights, etc. from the
failed Broadcast Internat'l merger.
-- AllDigital's Board remains comprised of only one outside Director and
three executive insiders.
We believe that these recent developments and overall continued lack of
market penetration and business progress are damaging to the
interests of AllDigital's shareholders. We strongly believe that
these trends will likely freeze your stockholders out of any
possibility of realizing AllDigital's long term potential.
AllDigital's future is far from certain as a standalone company, and
it is unlikely to be sustainable without an immediate business
combination such as we are proposing with Abacast, or significant and
Under our proposal, AllDigital would acquire all of the outstanding
shares of Abacast in a reverse merger such that AllDigital would own
38% and Abacast would own 62% of the common stock of the combined
company, excluding options and warrants. Per share consideration,
exchange ratios, option pools, etc. will be determined early in the
due diligence process.
Given AllDigital's status today based on publicly available
information and that your stock is highly illiquid, we believe our
proposal represents a significant premium relative to AllDigital's
intrinsic value and will receive the support of a majority of
AllDigital's independent shareholders. By whatever financial measure
you use -- EBITDA, free cash flow, or operating cash flow, this
proposal represents a compelling value realization event for all of
AllDigital's shareholders. It also represents a significant premium
to where AllDigital would likely trade on a standalone basis if there
was liquidity in your stock.
Our proposal is subject to the negotiation of a definitive merger
agreement and our having the opportunity to conduct certain
confirmatory due diligence, including diligence calls to AllDigital's
few customers that represent 80% of your revenue. It is also subject
to Abacast receiving management control of the combined company, the
negotiation of severance payouts to certain executive officers, the
execution of releases from liability in light of multiple SEC filings
alleging breaches, damages, reserved rights, etc. associated with the
failed Broadcast International merger. In addition, because
AllDigital would be acquiring the outstanding stock of Abacast, we
would provide AllDigital the opportunity to conduct appropriate
limited due diligence with respect to Abacast.
The closing of the proposed transaction is conditioned on the
availability of equity financing for go forward operating capital for
the combined company.
We are prepared to deliver a draft merger agreement to you, meet with
you, and begin discussions immediately, given time is of the essence.
Due to AllDigital's status today and the value represented by our
proposal, we expect you to engage in a full and immediate review of
our proposal, and believe it is appropriate to receive a response on
or before January 17th, 2014. Depending on the nature and timing of
your response, Abacast reserves the right to call a special meeting
of the AllDigital shareholders, and pursue any other steps necessary
to ensure that your shareholders are provided with the opportunity to
realize the value inherent in our proposal. In the interim, we would
strongly caution you against adopting any precautionary measures to
try to control the outcome of what's best for AllDigital's
In light of the significance of this proposal to you, AllDigital's
shareholders, and Abacast's shareholders, as well as the potential
for selective disclosure, our intention is to publicly release the
text of this letter immediately.
We believe this proposal represents a unique opportunity to create
significant value for your shareholders, enhance your value
proposition and service offering to customers, and benefit your
employees. We hope that you share our enthusiasm and look forward to
hearing from you on or before January 17th, 2014.
Chief Executive Officer
This letter contains forward-looking
statements, which include any predictions, projections or other
statements about future events based on past events, current
expectations, and assumptions that are subject to risks and
uncertainties. The potential risks and uncertainties include, among
others, that the expected financial and other benefits from the
transaction may not be realized, including because of: our inability
to close the transaction, including expressly Abacast potentially
revoking or modifying its proposal based on the required due
diligence referenced herein; the response to the proposed acquisition
by the customers, employees, and partners of AllDigital's or
Abacast's business; the extent to which we achieve anticipated
operating efficiencies and cost savings, and anticipated video
monetization targets; our ability to penetrate the advertising video
monetization business; audited results differing materially from
estimates referenced herein; the inability to achieve the referenced
and other material agreement terms referenced herein; unanticipated
restructuring expenses; any restrictions or limitations imposed by
regulatory authorities; the impact on Abacast and AllDigital
management and organizational changes resulting from the proposed
business combination; the ability to retain key AllDigital personnel;
our effectiveness in integrating AllDigital with Abacast's business;
risks related to AllDigital's business described in their filings
with the Securities and Exchange Commission ("SEC"), including their
Forms 10-K and 10-Q; and our ability to realize our broader strategic
and operating objectives. Actual results may differ materially from
the forward-looking statements because of these and other risk and
uncertainties of our business.
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