Mobile marketing and advertising technology company Velti has agreed to sell its India, US and UK mobile marketing businesses and certain part of its US-based advertising businesses to affiliates of GSO Capital Partners LP, the credit division of the PE firm Blackstone. The sale is expected to close by end of 2013.
Velti informed this transaction will include the sale of Air2Web India, Velti Inc & Air2Web in the United States and Velti DR Limited & Mobile Interactive Group in the United Kingdom. The financial terms of the agreement were not disclosed.
As per the terms of the agreement, Velti’s US operations has filed voluntary petitions under Chapter 11 of the US Bankruptcy Code with the US Bankruptcy Court for the District of Delaware to implement the sale under Section 363 of the Bankruptcy Code. However, the company noted this filing doesn’t include its operations in the UK, Greece, India, China, Brazil, Russia, the United Arab Emirates, or any other jurisdictions outside the US.
It also noted that while the sale agreement includes the UK and Indian operations of Air2Web India and the UK operations of MIG business, these businesses are not included in the Chapter 11 filing and are continuing business as usual. Velti had acquired mobile marketing and CRM company Air2Web for around $19 million in 2011.
As part of the transaction, GSO has also committed to provide up to $25 million in debtor-in-possession financing, including a $10 million cash infusion to support the operations included in the proposed sale.
Mobclix Shutting Down
Velti’s mobile ad exchange Mobclix is however shutting down its business and has filed a voluntary petition under Chapter 7 of the US Bankruptcy Code to initiate an orderly wind-down of the business. Mobclix is the only Velti business that will cease operations. Last year, Velti CEO Alex Moukas had told Medianama that it was planning to extend Mobclix to India, however there has no updates on this ever since.
Besides this, Velti had also tied up with HT Media to form a mobile marketing joint venture called HT Mobile in November 2008, however HT Digital had bought out Velti’s stake for a undisclosed nominal price in February 2013.
Interestingly, Moukas was quite upbeat about their India prospects and had told Medianama last year that they were planning to double their 100 people team in India in 18 months, but its not been 18 months yet!
Velti had declared $130 million in losses at the end of Q2 2013 compared with a net loss of $17.7 million at the end of Q2 2012. The company highlighted difficulties it has faced collecting payments in some countries, particularly in Greece and Cyprus, as contributing to its disappointing results. This news was followed by a class action law suit against the company by investors who said that the company misled shareholders by claiming for more than two years it could recover money owed by customers in Greece and Cyprus.
The investor suit targeted Velti and three current and former executives: CEO Alex Moukas, CFO Jeffrey G. Ross, and former CFO Wilson W. Cheung. According to Business Insider, the suit was filed on behalf of all people who held Velti stock between January 27, 2011 and August 20, 2013. The dismal performance due to payment issues in Greece and Cyprus coupled with the law suit could well have been the nail in the coffin for this company.