August 02, 2007 |
If you haven't heard of eBaum's World, a viral online video portal, now you will. HandHeld Entertainment, has purchased the popular web destination for $15 million in cash and another $2.5 million in stock. Current estimates suggest a possible total of $50 million in cash and stock over the next three years.
Today's press release revealed that the site generated approximately $5.2 million in revenue and $1.6 million in net income last year. It also mentions that the video service acquired 2.5 billion page views in the last year. eBaum?s World claims that its site has an average of 10 million unique visitors per month.
According to Michael Inouye, a research analyst with In-Stat, “HandHeld has instantly become one of the leaders in online video and user-generated content and is now rubbing shoulders with YouTube and the video networks of such companies as Yahoo!, Microsoft, AOL and Google. This truly is a terrain-changing event in the UGC and online video markets.”
eBaum's World was launched in 1998 by Eric Bauman and, just last year, pulled in $10 million in ad revenue. This news, however, led to a Wired article in which video content creators accused Bauman of making some of that money by reposting their valuable content.
As for the financial terms, they are not what you would call simple. eBaum's world is to get $15 million in cash when the deal closes later this year. At the closing of the deal, $2.5 million in Handheld Entertainment stock will be awarded. If targets are met, this will rise to at least $5 million in stock.
It doesn't end there though. If various milestones are met, Bauman could earn another $15 million in cash and $17.5 million in stock over three years. According to ValleyWag, “HandHeld is borrowing $24 million, largely to finance the eBaum's deal. That leaves it with $9 million — not enough to pay eBaum's the extra $15 million it's owed under the earnout deal. That means that eBaum's $67.5 million isn't just conditional on its traffic — it's conditional on HandHeld's ability to raise money.”
The acquisition and financing for the deal are currently subject to shareholder approval and closing conditions which is expected to close within 75 days.