Anghami, the music streaming rival of Spotify in the Arab world, is set to become the first technology firm from the region to list on the Nasdaq in New York, following a merger with a blank-cheque company.
The deal with Vitas Media Acquisition Company (VMAC), a special purpose acquisition firm, or SPAC, set up last year will be one of the biggest investments in a technology start-ups this year, valuing the company at $220 million, or about 2.5 times its 2022 estimated revenue.
The company will raise about $100m in funding through the deal and about 70 per cent of proceeds will be reinvested to spur growth, Anghami co-founders Eddy Maroun and Elie Habib told The National on Wednesday.
UAE-based investment bank Shuaa Capital and VMAC parent, Vistas Media Capital, have gathered commitments of a combined $40m in PIPE – private investment in public equity – financing. Shuaa, which has already invested in Anghami in an earlier funding round, has committed $30m and Vistas contributed the remainder.
“We are raising four times more capital than we raised our entire life,” Mr Habib said. “Over the past nine years, we have raised $26m.”
Once the merger deal is completed and Anghami has put its growth plans in place, it will look to cross-list on an exchange in the UAE or Saudi Arabia’s Tadawul, the biggest Arab bourse, Mr Maroun said.
The “Nasdaq is liquid and this raises the profile of the company. But there is nothing that prevents [us] from listing in the region,” Mr Maroun said. “So that hopefully [will be] the next stage” of growth for the company, he added.
Anghami and Nasdaq-listed VMAC, which raised $100m through its listing last year, have signed a definitive merger agreement. The combined company will operate under the Anghami name and the transaction is expected to close in the second quarter of 2021.
SPACs, which are listed companies, are often formed to merge with private ventures, allowing them to become publicly traded entities. The process, which is quicker than an initial public offering, helps to avoid uncertainties associated with a public float. SPACs have become a popular way for venture-backed start-ups to list on the public markets.
Start-ups in the Mena region secured record funding of more than $1 billion last year, despite the coronavirus pandemic, with technology ventures attracting capital, according to data platform Magnitt. Start-ups raised the bulk of funding during the first six months of the year. Private ventures have so far relied on venture capital or strategic investments for financing, but the emergence of SPACs expand their listing and financing options.
Mr Maroun will remain the chief executive of the company and Mr Habib will continue as the chief technology officer. F. Jacob Cherian, chief executive of VMAC, is expected to join the firm as co-chief executive for a period of one year.
The co-founders, will remain the largest shareholders after the transaction, Mr Maroun said, adding that 30 per cent of the SPAC’s cash is expected to be distributed to current shareholders.
Anghami is currently backed by some of Mena region's venture capital firms and strategic shareholders, including media groups and telecommunications companies that collectively own about 68 per cent of the company. The rest is controlled by the founders.
The mix of cash and equity paid to existing Anghami investors depends on the amount of cash in trust net of redemptions, the amount of capital raised in the PIPE and the transaction costs, according to the company.
The enterprise value remains fixed at approximately $220m regardless of the redemptions and PIPE proceeds.
Anghami, which moved its global headquarters and its research and development centre from Lebanon to Abu Dhabi’s tech accelerator Hub71 in January, has offices in Beirut, Dubai, Cairo and Saudi Arabia’s Riyadh.
Founded in 2012 Anghami offers more than 57 million songs to its 70 million registered users with around 1 billion streams per month.
With an Arabic speaking population of more than 450 million globally, a listing on Nasdaq will allow the company to expand its user base, Mr Maroun said.
Most of the funds will go to “growth marketing because we believe the region has a lot of depth and untapped potential”, he said.
“We have plans to grow into [the Arab] diaspora outside the region and this is also a massive market of more than 100 million people that we never invested in.”
The company, he said, is also looking at some emerging markets as part of its next phase of growth and will continue to boost its spending on R&D and technology to build more international partnerships.
Aramex, the Middle East's biggest provider of logistics and transportation solutions, which was founded by Fadi Ghandour in1982, became the first company from the Arab world to list on the Nasdaq in 1997. It later delisted in 2002 and went public again in 2005 on the Dubai Financial Market.