Artificial intelligence (AI) and e-commerce marketing company OpenDNA (ASX: OPN) has taken a definitive step into the Chinese market with the announced acquisition of Chinese digital marketing company Quality Brands International Direct (QBID).
To carry out the deal, OpenDNA will pay $50,000 in cash and issue $492,000 in new shares at $0.038 per share (a slight premium to yesterday’s closing price of $0.036), while also providing $125,000 in working capital for QBID’s ongoing operations.
The acquisition was first announced in September this year, with OpenDNA stating at the time that it was seeking to achieve “aggressive growth targets” while leveraging complementary and overlapping customer base and synergistic skill sets with QBID.
The rationale behind the deal was to “immediately and significantly increase annualised revenue” with today’s completion expected to be done in the next two days.
The Chinese company was founded by John Kilborn and George Panagios four years ago, with the duo driving e-commerce sales in China and providing a range of multiplatform e-commerce solutions across many major platforms and e-retailers in the world’s largest consumer market.
The duo will now join OpenDNA as part of the acquisition and will take up key roles in attempting to attain ambitious growth targets.
QBID’s speciality is to facilitate traditional business-to-business distribution for registered imported products in China, for the likes of Celebrity Slim, Essano, Nutriverse, Veta and Nuria.
Done deal
The deal is structured so as align the acquisitions price to be paid with delivered revenue from the QBID business. In total, OpenDNA will issue $2.3 million in shares and pay $200,000 in cash to complete the deal, based on receipt of $4.5 million in annual revenue achieved within the next three years by the acquired business.
Specifically, the acquired business must achieve $2 million in revenue in any six-month period and $4.5 million in any 12-month period within the next three years.
According to OpenDNA, the “strategically important” acquisition is set to deliver immediate additional revenue as well as complementary and synergistic digital marketing capabilities and immediate sales channels for OpenDNA’s RooLife customers.
RooLife is an e-commerce platform that matches Chinese consumers with Australian businesses, enabling Australian goods to be marketed and sold in a cost-effective manner that negates the need for excessive capital expenditure, ensuring brand protection and facilitating growth within the Chinese market without compromising broader global strategy.
The AI and e-commerce marketing company confirmed it was on target to generate revenue in excess of $1 million in Q4 2019 while the addition of QBID will deliver an expanded customer, product and revenue base going into 2020.
Based on QBID’s updated forecasts, revenue contribution from QBID for the remainder of the current financial year is expected to be approximately $1.2 million.
In a statement to the market, OpenDNA declared the deal will extend the services being offered by its RooLife business by adding “Chinese digital market, translation, logistics, warehousing, trade regulation and e-commerce platform experience”.
“We have been working closely with the QBID team while concluding this transaction and we are delighted to have John Kilborn, George Panagios Jonathan Cox and Wesley Gao and their teams joining the OpenDNA group,” said OpenDNA managing director Bryan Carr.
“We are excited by the opportunities and projects already underway and those expected to be delivered from December 2019 with QBID,” he added.
QBID’s founder George Panagios said that together, QBID and OpenDNA will wield an “enviable and unique combination of skillsets, networks and delivery capability” in both Australia and China.
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