IncrediMail Buys Smilebox for $25M in Cash

Publicly traded digital media company IncrediMail Ltd. will pay $25 million in cash, and up to $15 million in milestone-based payments, to acquire Smilebox Inc. Redmond, Wash.-based Smilebox, an online photo album and slideshow creator, was backed by investors including Bessemer Venture Partners and Frazier Technology Ventures. The company, formed in 2005, had raised at least $14 million from investors.

PRESS RELEASE
IncrediMail Ltd. (Nasdaq: MAIL), a digital media company that builds downloadable personal productivity consumer products, today announced that it has signed a definitive agreement to acquire Smilebox Inc., a U.S. consumer focused photo sharing and social expression company. The acquisition adds another major product to the IncrediMail portfolio, significantly diversifying its revenue mix.

Under the terms of the agreement, IncrediMail will pay $25 million substantially in cash at closing, with additional payments of up to $15 million, if certain milestones and performance based conditions are met, payable in two installments on the seven and 14 months anniversary from closing. Approximately 10% of the acquisition consideration will be held in escrow for 18 months.

“Smilebox is a great consumer brand that has established a loyal following through a strong focus on its consumers’ needs. This acquisition is a perfect fit for our growth strategy as it extends our product portfolio and substantially increases our premium subscription base,” said Josef Mandelbaum, IncrediMail’s CEO. “Finding the right acquisition to complement our existing business has been a top priority since I joined the company almost a year ago. We have worked hard and been extremely disciplined in our search for a company that meets our specific criteria. We are very excited about this acquisition as Smilebox’s high quality product and similar target demographic make the company an optimal fit for IncrediMail.”

Smilebox is an easy-to-use, downloadable desktop application that allows consumers to use personal photos and videos to construct one-of-a-kind creations, including: greeting cards, invitations, slideshows, scrapbooks and photo albums. Smilebox makes adding your personal touch and connecting with family and friends easy, unique and memorable.

Andrew Wright, CEO of Smilebox said, “We’re excited to become a division within the IncrediMail family of products and deliver easy-to-use digital products that inspire and delight second-wave technology adopters, in particular women. As the fastest growing consumer segment online, second wave adopters are looking for simple, safe and easy-to-use products. We believe that by leveraging our combined expertise to focus on this market, we’ll be in a better position to make the everyday life of our consumers simpler and put a smile in their hearts.”

Mandelbaum concluded, “My previous experience in acquiring similar businesses, combined with the seasoned team we have built to pursue and execute IncrediMail’s growth strategy, gives me confidence in the success of this, our first acquisition.”

IncrediMail expects Smilebox to generate cash sales in excess of $15 million in 2012 and be EBITDA accretive in the second half of 2012. The Company plans to further elaborate on the acquisition as part of its second quarter 2011 earnings call. The acquisition is expected to close during the third quarter of 2011. After closing, Smilebox will continue to operate from its Redmond-based offices, which currently employs roughly 50 people, and no material changes are anticipated to the organization.

About IncrediMail Ltd.
IncrediMail Ltd. (NASDAQ:MAIL) is a digital media company that builds downloadable consumer applications for second wave adopters. The company’s award winning e-mail product, IncrediMail Premium, is sold in over 100 countries in 10 different languages. Other products include PhotoJoy, a photo sharing and discovery product, HiYo, a graphic add-on to instant messaging software, and Magentic, a wallpaper and screensaver software.

About Smilebox Inc.
Founded in 2005 by Andrew Wright, Smilebox (http://www.smilebox.com) is an easy-to-use service that lets customers quickly turn life’s moments into digital creations to share and connect with friends and family in a fun and personal way. Since the service’s launch in June 2006, more than 15 million people have installed Smilebox and more than 180 million Smileboxes have been played worldwide. Smilebox is the only service that supports all personal media (photos, videos, music), all content types (ecards, invitations, slideshows, digital scrapbooks, photobooks and postcards) and all sharing methods (email, print, burn to DVD, blog and post to Facebook). Smilebox is a privately held company and headquartered in Redmond, Washington.