Yahoo has received approximately 80.8m shares of Limelight common stock, which values Edgecast at approximately $300m.
Edgio has announced the completion of Limelight’s acquisition of Edgecast. The combined company will operate as Edgio, delivering significantly increased scale and scope with diversified revenue across products, clients, geographies and channels, and an expanded total addressable market of $40bn.
Edgio said that its solutions will “combine the power of the world’s best performing edge platform with the most complete set of capabilities for web applications, APIs and video content – continuing on its strategy to improve profitability and growth”. Edgio now delivers about 20% of the world’s internet traffic from instant-loading websites to high-demand content for 20,000 leading digital companies such as Amazon, Sony, Kate Spade, Microsoft, Sun TV, Verizon, Disney, TikTok and Twitter.
Commenting on the acquisitions, Bob Lyons, CEO of Edgio, said: “In a world where digital workloads and their consumers are increasingly distributed, the ability for companies to deliver exceptional digital experiences requires them to more productively build faster and safer solutions for their customers at the edge. Today marks a meaningful step in our ability to address this need. Edgio now boasts the most complete edge-native web application and API solution, best-in-class streaming and delivery capabilities – all running on the world’s most performant globally-scaled edge network. These unique capabilities create a robust platform for growth and profitability.”
Edgio’s global edge platform delivers a capacity of more than 200 Tbps, more than 300 global PoPs and more than 7,000 ISP connections. Powered by this foundation, Edgio AppOps securely delivers the web applications and APIs on the planet, while also being the most complete solution with natively integrated developer tools, multi-layered security and network.
Building on this platform, Edgio will improve its revenue profile to include a balance of both usage-based and SaaS-like margin profiles. The expansion of cross- and up-sell opportunities coupled with increased channel capabilities support planned growth improvements. On a pro-forma basis, the largest client will be approximately 13% of revenue, with no other client exceeding 10%.
Profitability will benefit from annual run-rate cost synergies of greater than $50m, including approximately $30-35m of COGs related to colocation and internet peering expenses, and approximately $15-20m of operating expense savings. Edgio expects to achieve approximately half of the $50m in synergies in the first two quarters after closing. Additionally, the $30m cash investment by Apollo Funds further strengthens the balance sheet to support continued growth initiatives.
Based on these drivers, Edgio will continue building growth and profitability momentum in the near term toward its longer-term strategic target of balanced rule-of-40 performance.
Apollo Partner Reed Rayman, who will join the company’s board of directors, added: “Edgio stands to be a recognized leader in delivering digital solutions natively at the edge, and Apollo is very excited to participate in this shared vision. We believe Edgio can quickly become the recognized go-to partner to power edge native digital solutions for businesses seeking to deliver faster and safer digital experiences for their customers.”
Management intends to provide a combined financial outlook for the calendar year 2022 in conjunction with the release of its Q2 2022 financial results.
Edgio said its board of directors will be reshaped to better align with the needs of a growth-oriented, profitable and globally-scaled technology company. The addition of Reed Rayman and E-Fei Wang from Apollo signal their belief in Edgio’s future and provide strategic and operational expertise. In addition, Edgio welcomes Dianne Ledingham, a seasoned technology executive and strategy leader to the board.
Bob Lyons, CEO of Edgio, stated: “We will continue building a board and management team with the technology, operations and strategy skills required to support the company we are quickly becoming. Our board and management is committed to the belief that our ability to deliver high performance and innovation benefits from bringing together diversified perspectives and experiences.”
In connection with the sale, Yahoo received approximately 80.8m shares of Limelight common stock, valuing Edgecast at approximately $300m based on the 30-day trailing VWAP of approximately $4.12. The purchase price included a $30m cash investment into Edgio by Apollo and its co-investors, through their ownership of Yahoo as well as preliminary net working capital adjustments, which include the prepayment of certain expenses by Yahoo. Yahoo can also receive up to an additional 12.7m shares of Edgio, representing up to $100m of additional deal consideration, over the period ending on the third anniversary of the closing of the transaction, subject to the achievement of share-price targets. Edgio stockholders own approximately 66.8% of the combined company, or approximately 63.5% under the assumption that Edgio achieves all share price targets under the conditional consideration agreement, while Yahoo will own approximately 33.2% or 36.5%, respectively.
