Spark Networks price target raised to $19 after Zoosk deal at Canaccord. Canaccord analyst Austin Moldow raised his price target on shares of Spark Networks to $19 from $14 following the company's announcement of a deal to combine with Zoosk and after recent "upbeat" investor meetings with Spark's CEO and CFO. The scale gained from the combination with Zoosk has the potential to measurably improve marketing efficiency, said Moldow, who keeps a Buy rating on Spark shares.
Spark Networks announced its entry into a definitive agreement to acquire Zoosk. The combination will drive a meaningful increase in Spark's scale, with over one million monthly paying subscribers across the two platforms. Spark expects the transaction to drive meaningful margin expansion in 2020 and beyond. "Zoosk is one of the strongest dating apps in the North American market, which comprises half of the $5B global online dating opportunity," said Jeronimo Folgueira, Chief Executive Officer of Spark Networks SE. "Similarly, North America has been a key strategic market for Spark, and the focal point for our growth initiatives. Our deal with Zoosk creates the second largest online dating platform in North America and the second largest publicly-listed dating company in the world. Over the past 18 months, our management team has successfully integrated acquisitions and developed new brands. As a result of these efforts, our brand portfolio now includes SilverSingles, which continues to exceed our expectations, and the Christian Mingle, Jdate and JSwipe brands, which have all shown significant improvement since they were acquired in late 2017. Our acquisition of Zoosk is the most transformative deal in our history, and we expect the transaction to immediately strengthen our position in the online dating market. With the increased scale that results from the combination, we see a clear path to profitability improvements and greater opportunity to invest in innovation and growth initiatives that will drive shareholder value." With the addition of Zoosk, Spark will more than double in size and the combined business will be considerably more valuable than the two stand-alone entities: Following the completion of its integration plans, Spark expects to drive significant Adjusted EBITDA margin expansion. In 2020, Spark expects Adjusted EBITDA to exceed $50M. Under the terms of the agreement, Spark will acquire 100% of Zoosk's shares with a combination of cash and stock valuing the company at approximately $255M based on the closing price of Spark Networks SE stock on March 20. Spark will issue 12.98M American Depository Shares valued at approximately $150M based on the closing price of Spark Networks SE stock of $11.53 on March 20. Additionally, Zoosk shareholders will receive net cash consideration of $95M at closing and $10M via a deferred cash payment in December 2020, which will be funded through a new $120M senior secured debt facility. The transaction is expected to close early in the third quarter of 2019.
Spark Networks initiated with a Buy at Canaccord. Canaccord analyst Austin Moldow initiated Spark Networks with a Buy rating, noting that its recent merger has created the fifth largest dating portfolio measured by subscription revenue. The analyst believes the combined entity's forward growth will be driven by its investment in three U.S. brands. Moldow has a $14 price target on Spark Networks shares.