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Babylon sells translation activity

Amnon Ovadia, Babylon’s founder, purchased the activity for $2.5 million.

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After being forcibly separated from Google, its main source of income, it appears that Babylon Ltd. (TASE:BBYL) is going through an online version of a recovery process, as part of which it is selling its traditional translation and organizational data retrieval activity. The company, controlled by chairman Noam Lanir, announced this morning that these two activities would be sold to a Babylon Software, a private company founded for the purpose of the deal, and controlled by Babylon founder Amnon Ovadia and his wife, Bela.

Founded in 1997, Babylon was known for its translation software. The $2.5 million sale price will be given to Babylon in three stages: $1 million upon the signing of the deal, $750, 000 a year later, and $750, 000 within two years of the date on which the deal was closed. As part of the deal, Babylon will also grant Ovadia’s company an eight-year license to use the Babylon brand name and subdomain names related to the activity being sold, in exchange for royalties totaling 45% of the difference between the purchaser’s revenue and expenses (in effect, the profit) above $2.8 million for a period of five years from the date on which the deal was closed.

Following the sale, Babylon will be left with its advertising activity based on online searches, mostly through cooperation with Yahoo! This activity accounted for 60% of Babylon’s N$22.5 million in revenue in the first half of 2014, compared with $94.6 million during the corresponding period last year. The company’s revenue from the sold activity totaled $2.7 million (12% of the total), about the same as in the corresponding period last year, a comparison indicating that this source of revenue has already been exhausted as a growth engine. Babylon’s first half net profit was $7 million, compared with $22.3 million in the first half of 2013. Babylon trades at a $37 million market cap, following a 37% decline since the beginning of the year.

Simultaneously with the publication of its business results, Babylon announced the distribution of a $34.7 million dividend to its shareholders. Lanir said, “After a long process of assessing the alternatives facing us for using the accumulated cash balances, we believe that the good of the shareholders right now requires the distribution of a dividend, rather than making other risky investments that are disproportionate to the company.”

 

Published by Globes [online], Israel business news – www.globes-online.com

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