Edge enabled web applications and content delivery solutions provider, Limelight Networks announced that the company has entered into a definitive agreement to acquire Edgecast, edge security, content delivery, and video services provider, in an all-stock transaction. After the transaction, Edgecast will be valued at approximately $300 million. The company is a business unit of Yahoo, owned by funds managed by affiliates of Apollo and Verizon Communications.
$40 billion total addressable market
With the transaction, Yahoo will receive approximately 72.2 million shares of Limelight common stock, subject to customary closing adjustments, and will own approximately 31.9% of the combined company at closing. With the combination, the duo will create an edge-enabled software solutions provider with pro forma 2021 revenue of over $500 million across cloud security and web applications, content delivery, and edge video platform.
Compelling Strategic Rationale and Financial Benefits
- Expands Scale and Strengthens Platform to Better Deliver Blue-Chip Customer Performance, Productivity and Protection Through Edge Computing Solutions: The combined company will be a leading global, edge enabled solutions provider with a global network capacity of more than 200 Tbps and more than 300 PoPs coupled with natively integrated cloud security, edge video platform and web applications to power the next generation of customer needs.
- Accelerates Penetration of High Growth $40 Billion Total Addressable Market (TAM): The transaction is expected to accelerate Limelight’s ability to serve its total addressable market of approximately $40 billion, through expanded capabilities, portfolio targets and new opportunities across OTT video, cloud security and enterprise secure access, in addition to existing content delivery and web applications solutions.
- Diversifies Revenue Mix and Strengthens Financial Profile: On a combined basis, the two companies generated $502 million in revenue in 2021. Edgecast generated $285 million in revenue in 2021, of which approximately 97% was recurring revenue from a highly complementary customer base with little Limelight overlap and nearly half coming from high-growth, high-margin products.
- Creates Robust $100 Million Web Applications Solution with Expanded Security Capabilities: Edgecast’s multi-layered cloud security platform will significantly enhance the scale of Limelight’s web applications division with projected revenue of more than $100 million. These solutions will provide a holistic cloud platform for web apps and APIs that increase performance of digital assets, accelerate application usage, provide robust protection and enhance developer productivity and capability.
- Substantial and Immediately Accretive Cost Synergy Opportunities: The transaction price of $300 million implies an acquisition multiple of approximately 1x Edgecast’s 2021 revenue. The combined company expects annual run-rate cost synergies of $50 million including approximately $30-35 million from reduced colocation and internet peering expense, and approximately $15-20 million of operating expense savings.
- Adds Support from Apollo to Position for Growth: With support from the Apollo Funds, and alignment with all shareholders, the combined company will be positioned to unlock significant growth opportunities in an attractive sector and capitalize on market trends. The all-stock nature of the deal represents a strong belief by Apollo in the combined company’s go-forward strategy and future as a global leader in edge enabled software solutions.
Bob Lyons, Chief Executive Officer of Limelight said,
« By uniting Limelight and Edgecast, we are building a powerful application, content, and video edge enabled solutions company that delivers improved customer performance, productivity, and security for the outcome buyer. Together we have a strong value proposition to serve the fast-growing, yet fragmented edge solutions market and our combined capabilities will accelerate our ability to capture more share of this high growth $40 billion total TAM. In six short months we have taken our TAM from $12 billion to $40 billion and with the acquisition of Edgecast, we are further accelerating and solidifying our ability to be recognized as a leader in edge software solutions for the outcome buyer. »