Taboola-Outbrain merger called off

Taboola and Outbrain will no longer merge after the companies failed to come to an agreement nearly one year after announcing a deal to form a combined US$2 billion entity.

The two native advertising companies provide content recommendation engines on publisher sites, which generate revenue via user clickthroughs.

The two announced in October 2019 they had entered into an agreement to merge, subject to customary closing conditions. At the time, the terms of the deal stated that Outbrain shareholders would receive shares representing 30% of the combined company plus $250 million in cash. The deal was labelled a merger, but the combined entity would have been called Taboola, with Taboola’s founder Adam Singolda becoming CEO, according to the terms. Both companies' board of directors approved the transaction.

Joining forces would allow the two similar companies to create a "more robust competitor to Facebook and Google, giving advertisers a more meaningful choice", Singolda said of the deal. Together they would reach 2 billion people a month, the companies said. The original press release announcing the deal has been taken down from Taboola's website.

Taboola CEO Adam Singolda and Outbrain CEO Yaron Galai

In the 11 months that have followed, talks between the two entities have broken down. Neither company has provided an on-record statement as to the exact reason why the merger has been called off, but according to a source close to the deal, it came down to a disagreement over terms.

The consortium of banks who were providing the capital for the cash component stalled, so the deal expired in August and was not renewed. Taboola is then said to have tried to shift the deal into an all-stock transaction rather than shell out $250 million in cash, which was not seen as favourable to Outbrain or its shareholders. The companies couldn’t reach an agreement, and ultimately decided to terminate the deal.

Covid-19 is likely to have played a part in the stalling of the deal. Advertising revenue has dropped this year as many brands pressed pause on spend to deal with the impact of Covid-19. Both Taboola and Outbrain were well-placed to weather the storm—they were profitable as of October 2019, with each claiming around $1 billion in annual revenues. But their prospects likely changed this year, making a cash deal more difficult to facilitate.

There's also the thorny issue of antitrust investigations which risked stalling or stopping the deal. Though the US Department of Justice decided not to challenge the deal after investigating it, the merger was being investigated in the UK and in Israel, where both companies were founded. This was a side issue to the terms disagreement, but may have dampened appetite to hash things out.

The ending of the merger talks was first rumoured in the Israeli press. Campaign Asia-Pacific has reached out to both companies. Outbrain would not provide comment, and Taboola did not respond by time of publication.