In a move that would consolidate two aspiring second-screen TV apps players, Viggle announced Monday plans to acquire GetGlue for $25 million in cash plus stock -- but Viggle first needs to raise a substantial amount of capital to complete the deal.
Under the terms of the deal, Viggle will pay $25 million in cash and 48.3 million shares of stock (currently worth about $59 million) for GetGlue. Viggle said it will operate the Viggle and GetGlue brands, and GetGlue founder and CEO Alex Iskold will join Viggle in a senior executive position on its management team and as a member of its board. Viggle will also absorb all 34 of GetGlue’s employees.
The combined company will have nearly 4.5 million registered users, which Viggle said will help it drive toward scale to line up more advertising clients and TV programming partners.
The two New York-based startups are among a host of other companies in the still-nascent "second screen" apps arena aiming to exploit the fact that TV viewers increasingly are watching television while using mobile devices.
The deal is contingent upon Viggle raising convertible debt financing equal of at least $60 million, according to a Viggle representative.
Viggle has been hemorrhaging money as it tries to get traction for its TV loyalty app, which rewards users for tuning in to their favorite shows. The company, whose stock is traded over-the-counter, reported revenue of $1.7 million and a net loss of $96.5 million for the 12 months ended June 30, 2012, according to a filing with the Securities and Exchange Commission.
Moreover, Viggle had $2.96 million in cash and equivalents as of June 30, according to the 10-K filing. On Oct. 4, Sillerman's investment firm agreed to advance up to $10 million to the company, with an additional $2 million advanced on Oct. 31, 2012.
“With this deal, we are combining very experienced and creative product, engineering and management teams that will continue to build great user experiences and provide industry leading platforms for consumers, networks and advertisers,” Robert F.X. Sillerman, Viggle's founder, executive chairman and CEO, said in a statement. “We will also be vastly increasing the Viggle user base and quadrupling our network partnerships. Viggle and GetGlue users can look forward to using the apps they have come to love as we add new and appealing features made possible by the combined resources of this clear industry leader.”
Iskold said in a statement: “GetGlue has built a Social TV product that people love, and Viggle has become their favorite loyalty program for TV. Together we are positioned to deliver the next generation second screen experiences that delight and benefit users, networks and major brands.”'
Viggle, which launched its app in January 2012, counts 1.2 million registered users to date. The company grants “watchpoints” to users when they tune into TV programs on more than 170 networks (verified by audio-recognition technology). Those points may be redeemed for gift cards, credits and other rewards from partners including Best Buy, Amazon, Comcast’s Fandango, Hulu Plus and iTunes.
Sillerman, who founded Viggle in mid-2010, previously founded and ran CKX, which among other properties acquired American Idol producer 19 Entertainment.
GetGlue, founded in 2007, has claims to have more than 3.2 million registered users as well as a database with more than 500 million entertainment ratings and check-ins. Its GetGlueHD app provides customers with a personalized guide for both TV and online content, presented in a calendar form.
Allen & Co. represented GetGlue in the transaction, while Viggle handled the deal internally.
GetGlue’s investors include Rho Ventures, Time Warner Inc., RRE Ventures and Union Square Ventures.
Sillerman, along with other investment partners, formed what is now Viggle with a reverse merger in February 2011 of Gateway Industries Inc., a defunct database-marketing software firm, renaming the company Function(x). The company officially changed its name to Viggle Inc. in June, and its stock is traded over the counter under the symbol “VGGL.”