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Update: On 12 March Appen announced its $285 million placement to help fund the acquisition was successfully completed.
Machine learning and AI company Appen (ASX: APX) expects a material increase in its revenue and customer base following a binding agreement to acquire San Francisco-based Figure Eight Technologies, Inc.
The Sydney-headquartered tech outfit has seen its share price soar 97 per cent since the start of the year, buoyed by optimism around global opportunities for its human-annotated datasets that support the booming AI industry.
In market capitalisation terms, that confidence in Appen's business model equates to almost an extra $1.3 billion in value.
Figure Eight uses automated annotation tools to transform text, image, video and audio into customised high AI training data.
The acquisition is due for completion in late March or early April, with an upfront consideration of US$175 million ($250 million), as well as earn-out conditions that are expected to be in the range of US$60-80 million ($86-114 million).
The upfront payment will be funded by a fully underwritten placement of $285 million at an offer price of $21.50 per new Appen share, representing an 11.8 per cent discount to Appen's last closing price on the ASX.
However, the earn-out could potentially reach a cap of US$125 million ($178 million) which would be payable by March 2020.
Appen CEO Mark Brayan (pictured) says the union of the two companies creates a unique, exciting and powerful opportunity for our customers.
"We now have the best of both worlds: Appen's highly efficient crowd management platform and scalable, skilful multi-lingual crowd, combined with Figure Eight's innovative customer-facing SaaS platform with ML-assisted [machine learning-assisted] annotation," he says.
"I'm extremely proud of our team. This transaction is a genuine validation of everything we've achieved and a great platform for our teams to combine and continue to do amazing things in AI," adds Figure Eight co-founder Lukas Biewald.
Figure Eight will operate largely independently as a division of Appen through to the end of this year, before its team and technology are set to be fully integrated to form a key part of the group's growth strategy.
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