Automax Motors Ltd. — M&A Activity 2017

Dec 28, 2017

THIS ANNOUNCEMENT, INCLUDING THE INFORMATION CONTAINED HEREIN, IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION. PLEASE SEE THE IMPORTANT NOTICES AT THE END OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

Unless otherwise defined, the capitalised terms used in this announcement shall be the same as defined in the circular to shareholders giving notice of the EGM announced on 15 December 2017 and posted on Matomy's website.

Second and Third Option Exercise for Team Internet AG Shares

Financial update and segmental information

Update on proposed issuance of Bonds

Matomy Media Group Ltd. (LSE: MTMY, TASE: MTMY.TA, "Matomy" or the "Company"), is pleased to announce that following the announcement on 15 December 2017 of a proposed EGM and circular to shareholders of the Company (the "Circular") to approve the disapplication of preemption rights in connection with a possible issue of convertible Bonds to finance the second Sale Exit Sale option of shares in the Munich based company, Team Internet AG ("Team Internet"), which is the entity through which Matomy conducts its domain monetisation activity, following continued negotiation, Matomy has entered into an agreement with Rainmaker Investments GmbH ("Rainmaker") relating to the exercise of the Second and, in addition, the Third Sale Exit option. Rainmaker is the minority shareholder in Team Internet and is a vehicle held by the managing directors of Team Internet, and is therefore a related party of Matomy. The agreement will result in the sale and transfer of all of their remaining minority shareholding in Team Internet (being 20% of the issued share capital of Team Internet in aggregate) to Matomy or its designated affiliate and also sets out clear guidelines for succession ensuring a smooth transition,

The agreement is based on the terms set out in the Team Internet Framework Agreement, as outlined in paragraphs 14.5 and 15.1 of the Additional Information section of Matomy's IPO prospectus, dated 9 July 2014, but with some amendments designed to provide assurance and clarity on the sale of the full 100% of the shares in Team Internet to Matomy and put in place an guidelines for the transition and full transfer of control of Team Internet to Matomy.

The key agreements are as follows:

• In accordance with the calculation set out in the Team Internet Framework Agreement, the total consideration for the Second Sale Exit is EUR 18.2 Million, which is due in two installments: (i) the first in the sum of EUR 10 Million to be paid no later than 8 February 2018; and (ii) the second in sum of EUR 8.2 Million to be paid no later than 15 March 2018;
• The consideration for the Third Sale Exit is due no later than 30 November 2018 according to the formula set out in the Team Internet Framework Agreement, except that in a deviation from the Team Internet Framework Agreement, for the purposes of calculating the Third Sale Exit option, Team Internet's EBITDA will include a 10% premium;
• The parties also agreed on a full dividend distribution to the shareholders in Team Internet of all undistributed eligible profits for FY 2016 (including undistributed retained earnings) of approximately EUR 5M to support payment of the aggregate consideration for Second Sale Exit;
• As from 31 March 2018, Matomy or a nominee of Matomy shall hold the chair of Team Internet's supervisory board in place of Rainmaker;
• In a deviation from the Team Internet Framework Agreement, Rainmaker will be entitled to an additional consideration of 8% of the net earnings of Team Internet during the period beginning on 1 September 2018 and ending on 31 December 2018 and in the subsequent financial year beginning on 1 January and ending on 31 December 2019. In addition, a one-off bonus of US\$1M will be paid to Rainmaker for the extension of the cooperation between the Team Internet and its unrelated search engine provider beyond 31 July 2019, with a view to ensure their continued and ongoing support and interest in Team Internet.

Matomy intends to use the sums received from the full distribution of all undistributed eligible profits in Team Internet together with net proceeds to be received following the issuance of the Bonds, if and when completed, to finance the Second Sale Exit.

Sagi Niri, Matomy's CEO said: "We are delighted to reach this agreement for the full acquisition of Team Internet. Team Internet is a market leader in its space and one of our core assets. I am confident that Team Internet will continue to grow in revenues and profits, constituting a core part of Matomy's overall growth strategy."

Financial update and segmental information

As of January 1, 2018, Matomy intends to report its financial results on a quarterly basis with a focus on its core assets, Team Internet and Mobfox. In advance of this change, Matomy wishes to provide further financial information on these business units, elaborating on the consolidated financial data for the period ending on June 30, 2017 providing a summary of selected financial data, please refer to Exhibit I of this announcement. Furthermore, a copy of the review letter provided by our independent auditors in connection with the financial review of the Interim results for the period ending on June 30, 2017 is attached to this announcement.

Other developments and financial updates are as follows:

• Increased business opportunities in Team Internet, including large publishers.
• Mobfox completes integration with Factual, the neutral data company making location data accessible to everyone. By implementing Factual's Geopulse Audience targeting capabilities, MobFox is able to provide DSP partners with advanced mobile targeting using location-based data ensuring effective audience targeting for mobile advertisers and publishers.
• Proposed sale of Matomy's minority equity interest in Adperio Inc. to an unrelated third party for a total consideration of approximately US\$2M.
• The Company is in the process of performing internal analysis and based on indicative testing and internal unaudited results as of December 2017, the Company currently expects an accretion of redeemable non-controlling interest of approximately \$10M for the period from 1 July 2017 to 31 December 2017. This amount is attributable to the "redeemable non-controlling interest", and is recorded in the Company's financial statements under the mezzanine equity provision, which is separate from permanent equity, on the consolidated balance sheets and measured at each reporting period at the higher of their redemption amount (the value of the purchase price) or the noncontrolling interest book value.
• The Company is in the process of performing internal analysis and based on indicative unaudited impairment testing as of December 2017, using the assumptions below and the estimated annual results of 2017, the Company expects to record an estimate impairment charge with respect to its goodwill and intangible assets of approximately \$15 million in the second half 2017. The projected impairment charge is preliminary and could change after the finalization and approval of the 2017 results and the Company's cash flow projections.

Reporting Unit*	Domain Monetization	Mobile	Non-core
Terminal growth rate	3%	3%	3%
Discount rate (post tax) – (WACC)	15%	15%	15%

The Company used the following assumptions in its preliminary analysis:

*For goodwill impairment test, the Company utilizes cash flow projections for a five-year period based on management forecasts, with a terminal value which represents the value of the reporting unit beyond the five-year projection period.

Discount rates used consider the Company's estimated weighted average cost of capital associated with cash flow projections to approximate the weighted average cost of capital of a comparable market participant. Due to the above factors, actual cash flows and values could vary from forecasted future cash flows and related values derived using discounting techniques.

Update on proposed issuance of Bonds

Matomy currently expects to publish the Bond Offering Documents in respect to of the issuance of Bonds, of up to US\$25 million, during January 2018 and to complete the Bond offering in February 2018.

AS PREVIOUSLY STATED, THE NEGOTIATIONS RELATING TO THE TERMS OF THE CONTEMPLATED ISSUANCE OF BONDS ARE STILL NOT FINALIZED AND THERE IS NO CERTAINTY THAT THE ISSUANCE OF THE BONDS WILL BE INITIATED AT ALL OR CONSUMMATED. FURTHERMORE THE AMOUNT TO BE RAISED AND THE DEFINITIVE TERMS OF THE BOND ISSUANCE REFERRED TO HEREIN WILL BE ONLY THOSE DESCRIBED IN THE FINAL VERSION OF THE BOND OFFERING DOCUMENTS. FURTHERMORE, THE AFORESAID IS NOT AN OFFER OR INVITATION OR SOLICITATION OF ANY OFFER TO PURCHASE OR SUBSCRIBE FOR PURCHASE OF THE BONDS IN ANY JURISDICTION. FULL DETAILS REGARDING THE CONTEMPLATED ISSUANCE OF THE BONDS WILL BE INCLUDED IN THE BOND OFFERING DOCUMENTS.

This announcement and the information contained in it is restricted and is not for publication, release or distribution, in whole or in part, directly or indirectly, in, into or from the United States, Australia, Canada, South Africa or Japan or any other state or jurisdiction in which publication, release or distribution would be unlawful, restricted or unauthorised (each a "Restricted Territory"). This announcement is for information purposes only and does not constitute an offer to sell or issue, or the solicitation of an offer to buy, acquire or subscribe for the Bonds in any Restricted Territory or any other state or jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions. Subject to certain exemptions, the securities referred to in this announcement may not be offered or sold in any Restricted Territory or for the account or benefit of any national resident or citizen of any Restricted Territory. The Bonds have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold, taken up, resold, transferred or delivered, directly or indirectly, in, into or within the United States.

The Bonds, may be offered and sold only in Israel pursuant to a prospectus, once the publication thereof has been approved by the Israel Securities Authority ("ISA") and subject to Tel Aviv Stock Exchange (''TASE'') approval of the registration of the Bonds for trade. This announcement is for information purposes only and does not constitute an offer to sell or issue, or the solicitation of an offer to buy, acquire or subscribe for the Bonds in Israel, or any other jurisdiction.

No offering of the Bonds referred to in this announcement will be made in the United States, the European Economic Area, any Restricted Territory or elsewhere outside Israel.

The Bonds have not been and will not be approved or disapproved by the US Securities and Exchange Commission, any state securities commission or any other regulatory authority in the United States or elsewhere other than in Israel, nor have any of the foregoing authorities passed upon or endorsed the merits of the Bonds or the accuracy or adequacy of this announcement. Any representation to the contrary is unlawful.

This announcement includes forward-looking statements, which include all statements other than statements of historic facts, including, without limitation, those regarding Matomy's and/or its subsidiaries' (the "Group") financial position, business strategy, plans and objectives of management for future operations, or any statements preceded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or negatives thereof. Such forwardlooking statements involve known and unknown risks, uncertainties and other important factors beyond the Group's control that could cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forwardlooking statements are based on numerous assumptions regarding the Group's present and future business strategies and the environment in which the Group will operate in the future. These forward-looking statements speak only as at the date of this announcement. The Company, its directors and its or their advisers expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Group's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based unless required to do so by applicable law or the Rules of the High Growth Segment.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.

Exhibit I

Selected Mobile Financial Data (U.S. dollars in thousands)

Mobfox selected financial data
	H1 2017	H2 2016	H1 2016	H2 2015	H1 2015
Revenue	25,030	27,833	14,308	12,879	5,029
Adjusted gross profit	6,804	7,193	3,259	2,832	991
Adjusted gross margin	27.2%	25.8%	22.8%	22.0%	19.7%
Adjusted EBITDA	1,638	2,587	(567)	589	160

Selected Financial Data for Team Internet

Summary Team Internet financial Data (U.S. dollars in thousands)

	Six months period ended June 30, 2017	Year ended December 31, 2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	12,408	5,048
Trade receivables	9,147	6,068
Domains	-	9,965

	Six months period ended June 30, 2017	Year ended December 31, 2016
Other receivables and prepaid expenses	1,073	1,288
Total current assets	22,628	22,369
LONG-TERM ASSETS:
Property and equipment, net	592	590
Other long-term assets	65	36
Domains	10,931	-
Investment in affiliated companies	1,883	1,887
Other intangible assets, net	1,770	2,281
Total long-term assets	15,241	4,794
Total assets	37,869	27,163
CURRENT LIABILITIES:
Short-term bank credit and current maturities of bank loan	909	840
Trade payables	8,732	5,492
Accrued expenses and other liabilities	5,105	2,669
Total current liabilities	14,746	9,001
LONG-TERM LIABILITIES:
Deferred tax liability	277	275

	Six months period ended June 30, 2017	Year ended December 31, 2016
Accrued expenses and other liabilities	661	288
Bank loan	2,476	2,707
Total long-term liabilities	3,414	3,270
SHAREHOLDERS EQUITY	19,709	14,892
Total liabilities and equity	37,869	27,163
Revenues	51,674	63,306
Adjusted gross profit	15,216	19,319
EBITDA	11,633	14,115
Net Profit	6,832	8,407

Team Internet liquidity and cash flows:

Six months	Year ended
period ended	December
June 30,	31,
2017	2016

	Six months period ended June 30, 2017	Year ended December 31, 2016
Cash flows from operating activities:
Net income	6,832	8,407
Increase in domains held for sale	-	(4,151)
Other adjustments to reconcile net income to net cash provided by operating activities	4,138	(396)
Net cash provided by (used in) operating activities	10,970	3,860
Cash flows from investing activities:
Purchase of property and equipment	(5)	(425)
Capitalization of research and development costs	(246)	(547)
Sale of Domains	114	-
Purchase of domains	(1,002)	-
Net cash used in investing activities	(1,139)	(972)

	Six months period ended June 30, 2017	Year ended December 31, 2016
Cash flows from financing activities:
Receipt of bank loans	-	3,021
Repayment of bank loans	(455)	(513)
Dividend paid	(2,016)	(5,702)
Net cash provided by (used in) financing activities	(2,471)	(3,194)
Increase (decrease) in cash and cash equivalents	7,360	(306)
Cash and cash equivalents at beginning of period	5,048	5,354
Cash and cash equivalents at end of period	12,408	5,048

Team Internet - P&L information
	6 months period ended		12 months period ended
	June 30, 2017	June 30, 2016	December 31, 2016	December 31, 2015
Revenue	51,673	30,636	63,280	54,265
Change %	68.6%	20.3%	16.6%	23.1%
Adjusted gross profit	15,215	9,502	19,296	14,700
Adjusted gross margin	29.4%	31.0%	30.5%	27.1%
EBITDA	11,539	7,149	14,162	10,293
% of Income	22.3%	23.3%	22.4%	19.0%
Net profit (GAAP)	6,832	4,155	8,407	6,344