Tried digging deeper into Mag+....
As per AR of Mag+ AB, financials are available upto FY14 (December-ending so in a way our MPS's FY15 barring one quarter) :
INR converted revenues are 14.89 cr., 12.94 cr., 6.33 cr. and 4.64 cr. for Dec'14, Dec'13, Dec'12 and Dec'11 respectively.
INR converted EBITDA Loss are -(6.98) cr., -(18.63) cr., -(22.56) cr. and -(27.74) cr for Dec'14, Dec'13, Dec'12 and Dec'11 respectively.
This is typical for initial phase of a product development company. Majority of the cost is Personnel costs wherein salary seems average ~INR 0.70 cr. p.a.
Another Notable thing is -- starting November'2013, all selling and marketing functions are handled by Mag+ Inc based in US, so, whether the numbers include this entity's nos. or not that is unclear. However, that should be material post Dec'13 nos. as the entity didn't exist before that.
My Take on Acquisition :
Company has good platform in hands and its target seems to be small magazine publishers and Corporate SMEs. The company reminds of the previous big acquisition done by Mr. Arora that of MPS from Macmillan -- here we have the legacy of Bonnier as also a first mover in the space having launched 'Popular Science' concurrently with IPAD launch in 2010.
However, similarities end there as financial history of the company is not as strong as MPS had under Macmillan, as also connection with the parent is also not as strong as we have Bonnier removing its titles from Mag+ to Adobe DPS starting mid-2014. This is really surprising as we don't often see any organisation putting more trust on a peer platform than inhouse developed platform. How much Bonnier contributed to Mag+ that only Dec'15 results can tell which we don't have.
Another aspect to note is, with this acquisition, MPS gets scope for a non-linear revenue stream. However, it has not came ready-made and MPS will have to work really hard to develop this stream if past financials of Mag+ is anything to go by. Still, MPS is not having any strength as far as sales & marketing goes and that is what is critically required by Mag+. With a good investment, Mag+ could become a good BU of MPS but 'initial good investment' is what is required.
Its like acquisition of a good potential startup. If we are thinking of considerable improvement in profitability of Mag+ like Mr. Arora did with MPS or Element or will do for TSI, then that might be quite difficult with Mag+ as its a product/platform business and not a services business. This is not to say that such high reported losses of Mag+ will remain under MPS too as the losses that we see were in development phase and if the platform is fully developed, what might be required will only be investment in marketing and technology upgrade. But, this acquisition is definitely not a play on Mr. Arora's strengths.
Lastly, in addition to its future performance, it all depends on what price is paid for this acquisition to judge whether its a good, bad or ok acquisition from shareholder point-of-view.
-- If Mr. Arora has clinched this acquisition at a bargain price like he did for last three acquisitions, then its a great acquisition as it opens up good opportunity window at just a small cost (like say 0.5x Mag+ sales).
-- If this acquisition is done at reasonable price ( say 1x Mag+ sales) by utilizing company's internal accruals minus QIP funds, its an ok acquisition from shareholder point-of-view as it will require still further investments by MPS to make this acquisition a success and risk-reward in that case is 50-50.
-- If QIP funds in anyway are used for this acquisition then its a really bad acquisition unless the company has turned profitable in Dec'15 results which is highly unlikely or when combined with Mag+ Inc USA, the results look considerably different than we actually have.
I am surprised at the silence of the acquisition price as otherwise on past occasions, MPS has been quite forthwith and fairly transparent on that count (if we remember, in case of last acquisition which was TSI -- first acquisition post QIP-- management came immediately with a separate Q&A in addition to press release in which revenue, profitability and acquisition price was mentioned). However, there might be some form of NDA signed with Bonnier because of which for a certain time-period, financial details might not be disclosed. We might have to wait for Q1FY17 concall for any clarity on this front. If anyone is attending AGM on 19th July, then it might be a good platform to answer some of such queries.
Discl.- Negligible Holding.