Smart Eye Enters Into an Agreement to Acquire Affectiva and Intends to Raise Equity in a Directed Share Issue
- M&A Deals
- 25.05.2021 06:30 pm
For years, Smart Eye has been leading the driver monitoring space, enabling safe and sustainable transportation. As we watched this category evolve into Interior Sensing, monitoring the whole cabin, we quickly recognized Affectiva as a major player to watch. Affectiva’s pioneering work in establishing the field of Emotion AI has served as a powerful platform for bringing this technology to market at scale. At the end of the day, this is about saving lives and bridging the gap between humans and machines. In the future, looking back at this moment in time, I am convinced that this is a decisive moment for road safety thanks to the announcement that we have made today.
Martin Krantz, CEO and Founder of Smart Eye
We are excited to join forces with Smart Eye. Our pioneering work in Emotion AI and Human Perception AI, and our deep expertise in machine learning, data acquisition and annotation, makes us the perfect complement to Smart Eye. By combining our exceptional technologies and expert teams, we will bring our AI solutions to market at scale, capitalizing on the opportunities presented by the rapidly emerging automotive Interior Sensing market and beyond.
Rana el Kaliouby, CEO and Co-Founder of Affectiva, intended Deputy CEO of Smart Eye
Background and Reasons
Affectiva and Smart Eye are merging to create a global artificial intelligence (AI) powerhouse that will lead and accelerate the growth and development of the rapidly evolving automotive Interior Sensing market, as well as the Media Analytics and Human Factors Research markets.
Smart Eye has over two decades of experience building AI-based eye tracking and delivering automotive-grade Driver Monitoring Systems. Spun out of MIT Media Lab in 2009, Emotion AI pioneer Affectiva has, in recent years, broadened its technology to in-cabin sensing, using machine learning and computer vision to gain a deep, human-centric understanding of what is happening in a vehicle.
Rather than continuing as competitors in the automotive market, the companies are joining forces. Smart Eye and Affectiva have a joint view that interior sensing is the natural evolution of driving monitoring systems. By combining their best-of-breed technologies and two highly skilled and complementary teams, Smart Eye and Affectiva will bring to market unparalleled automotive-grade Interior Sensing AI. The combined company’s solution will not only improve automotive safety, saving human lives around the world, it will also provide differentiated mobility experiences that enhance wellness, comfort and entertainment.
In addition to strengthening Smart Eye’s automotive offering, Affectiva brings significant incremental revenues and profit from its industry-leading Media Analytics business. Used by 70 percent of the world’s largest advertisers, Affectiva’s enterprise-grade technology analyzes consumers’ emotional reactions to brand content and experiences. This technology has synergies with Smart Eye’s Research Instruments solutions, which provide the world’s leading research organizations with high-fidelity eye tracking systems for human factors research. The integration of Affectiva’s AI with Smart Eye’s eye tracking systems can provide human factors researchers and marketers with a more holistic and insightful view of people’s behaviors. Combined, the two companies will capitalize on the continued growth of behavioral technologies within the marketing and research industries, which has been accelerated by the COVID-19 pandemic. Further, the Transaction expands Smart Eye’s global presence. Affectiva’s Boston office gives Smart Eye a footprint within the vibrant technology innovation ecosystem on the US East Coast, and its Cairo office provides access to highly skilled local talent.
The Consideration for 100 percent of the shares in Affectiva amounts to USD 73.5 million, equivalent to approximately SEK 611.4 million, based on Affectiva’s financial position as of 31 December 2020. The Consideration consists of the Consideration Shares and a cash payment.
The value of the Consideration Shares amounts to USD 67.5 million, equivalent to approximately SEK 561.6 million, and the price per Consideration Share is based on Smart Eye’s volume weighted average price (“VWAP”) on Nasdaq First North Growth Market for the ten (10) consecutive trading days preceding this announcement excluding today’s trading, equal to SEK 238.5 per share.
The Consideration Shares will be paid with an initial issuance of 2,015,626 shares upon closing of the Transaction, and the remaining 339,042 shares (the “Deferred shares”) will be issued in lots of 84,301 shares (the “First tranche of Deferred shares”) and 254,741 shares (the “Second tranche of Deferred shares”) after one and two years, respectively, upon closing of the Transaction. The Deferred shares will be issued to a total of 11 Affectiva shareholders, of which 7 are key employees. Out of the initial 2,015,626 shares issued, up to 168,599 shares will be sold after closing of the Transaction.
|To be paid upon closing||2,015,626|
|of which issued following 1 year from closing of the Transaction||84,301|
|of which issued following 2 years from closing of the Transaction||254,741|
Issue of Consideration Shares
Smart Eye’s Board of Directors intends to issue 2,015,626 of the Consideration Shares upon closing of the Transaction. The First Tranche of Deferred shares is to be issued following one year from closing of the Transaction. The issue of 2,015,626 of the Consideration Shares is subject to the EGM granting the Board of Directors an issue authorisation to issue the Consideration shares to be issued at closing of the Transaction. The notice to the EGM will be announced in separate press release and is expected to be held on 11 June 2021. Smart Eye’s Board of Directors intends to propose to general meetings, to be held in proximity to the dates for when the Deferred shares are to be issued, to authorise the Board of Directors to resolve on issuances of the First Tranche of Defferred shares and the Second Tranche of Deferred shares.
The Consideration Shares are proposed to be issued at a price of SEK 238.5 per share, based on Smart Eye‘s VWAP on Nasdaq First North Growth Market for the ten consecutive trading days preceding this announcement excluding today’s trading.
The Directed Share Issue
Smart Eye’s Board of Directors intends to explore the conditions to carry out a directed new share issue of approximately SEK 275 million based on the authorization from the annual general meeting held on 14 April 2021. The Directed Share Issue will be conducted through an accelerated bookbuilding procedure conducted by Carnegie Investment Bank AB (publ). The bookbuilding procedure will commence immediately following the announcement of this press release. Pricing and allocation of the new shares are expected to take place before the trading on Nasdaq First North Growth Market commences at 09:00 CEST on 26 May 2021. The timing of the closing of the bookbuilding procedure, the pricing and the allocation of shares are at the discretion of the Company. The Company may also at any time decide to suspend, shorten or extend as well as to refrain in whole or in part from carrying out the Directed Share Issue. The Company will announce the outcome of the Directed Share Issue in a press release after the closing of the bookbuilding procedure.
The proceeds from the Directed Share Issue is intended to be used to fund i) Smart Eye and Affectiva’s joint business plan following the completion of the Transaction; ii) the USD 6.0 million cash consideration to the sellers of Affectiva as well as; iii) Smart Eye’s transaction costs relating to the Transaction.
The reason for deviating from the shareholders’ preferential right is to ensure the most time and cost-effective financing as possible of the continued scale-up of the business, so that the Company will be able to cover its financing needs until the obtained and potential additional customers begin to generate sufficiently large revenues to cover the Company's costs. As the subscription price in the Directed Share Issue will be determined through a bookbuilding procedure, it is the Board of Directors’ assessment that the subscription price will reflect current market conditions and demand.
In connection with the Directed Share Issue, the CEO and Founder, Martin Krantz, Board Member and Founder, Mats Krantz, and Chairman of the Board, Anders Jöfelt, have entered into a 720 days lock-up for 50% of their holdings and 360 days lock-up for 50% of their holdings after the settlement date of the Directed Share Issue. The Company’s CFO, Anders Lyrheden, CTO, Martin Rydberg, and the other members of the Board of Directors have entered into a 180 days lock-up after the settlement date of the Directed Share Issue. Furthermore, the Company has agreed to a commitment, with customary exceptions, not to carry out any additional issuances for a period of 180 calendar days after the settlement date of the Directed Share Issue.