SDL Sells Fredhopper for GBP 25m

Two down, one more to go. After selling its Campaigns business on November 3, 2016, language service and technology provider SDL found a willing buyer for its Amsterdam-based e-commerce software firm Fredhopper.

SDL acquired Fredhopper at the end of 2009 as part of then-CEO Mark Lancaster’s strategy to go beyond language services and become a software and technology company. Along with other features such as search, Fredhopper provides recommendations to online shoppers based on previous purchases.

Buying Fredhopper is ATTRAQT, a listed UK-based software firm very much like Fredhopper. ATTRAQT was founded in 2003 and listed on the AIM Market of the London Stock Exchange in 2014.

In 2016, ATTRAQT posted revenues of GBP 3.6m and, at press time, had a market capitalization of GBP 12.4m. To fund the acquisition, ATTRAQT announced a capital increase to raise GBP 28.5m.

SDL will receive a cash consideration of GBP 25m. The company had paid EUR 5m for Fredhopper in 2009. According to a press statement, SDL stands to make a “profit on disposal of GBP 21.3m.” The profit, more or less, balances out the GBP 20.1m loss on disposal from the sale of the Campaigns business.

The selling price is higher than expected. SDL said Fredhopper generated a pre-tax profit of GBP 0.5m in 2015 and, stripping out intercompany charges, GBP 2.7m in pro-forma EBITDA. A realistic figure is likely to be somewhere in between and yield an earnings multiple paid of around 15x.

Fredhopper is an integrated component of SDL’s enterprise web CMS solution SDL Web. SDL told Slator they will continue to partner with Fredhopper.

SDL said the proceeds of the sale go toward “the company’s growth strategy.” Despite CEO Adolfo Hernandez’s reluctance to consider acquisitions as a growth driver (i.e., “What I am not going to do is to just botch execution and then try to cover it with M&A”), Fredhopper’s disposal increases the likelihood of SDL returning to the M&A scene in 2017.

With Campaign and Fredhopper sold, what is left is Social Intelligence. The unit came with the GBP 68.4m acquisition of Alterian, but has never lived up to its promise.