ASX-listed Appen to spend around AU$340m on AI startup Figure Eight

Appen will issue new shares to raise AU$285 million to fund the majority of the Figure Eight Technologies acquisition.

Appen Limited has announced its intention to wholly acquire Figure Eight Technologies for a total consideration of approximately AU$340 million.

The Australian Securities Exchange (ASX)-listed artificial intelligence (AI) and machine learning-focused firm will raise AU$285 million, at an offer price of AU$21.50 per new Appen share to fund the acquisition, which will see an upfront payment of approximately AU$250 million.

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13.3 million new shares will be issued.

Following completion of the placement, Appen told shareholders it will also conduct a non-underwritten share purchase plan to existing eligible shareholders, capped at AU$15 million.

Once the upfront payment is made, under the terms of the deal, Figure Eight will be given an earn-out consideration, expected to be around AU$86-114 million, payable in March 2020.

This will be based on Figure Eight's FY19 revenue.

Based in San Francisco, Figure Eight is focused on machine learning, specifically around transforming unstructured text, image, audio, and video data into AI training data, mainly for use with "autonomous vehicles, consumer product identification, natural language processing, search relevance, and intelligent chatbots".

According to Appen CEO Mark Brayan, the acquisition of Figure Eight will allow his company to further capitalise on the opportunities presented by AI, by combining both businesses.

"The combined business puts Appen in a strong position to deliver the increasing volume, quality, and speed requirements for high quality training data," the company told shareholders.

Speaking with ZDNet previously, Brayan explained that a lot of what Appin does is centred on product development for major technology companies.

"We're a company that's contributing to artificial intelligence through the subset of natural-language processing on the global stage, with nine out of 10 of the major technology companies around the world using our service," said Brayan at the time.

"We improve, or enhance machine learning; speech systems -- the likes of Siri and Cortana -- are only as good as the data that they're fed."

The companies said that through to the end of 2019, Figure Eight would operate largely independently as a division of Appen to ensure it remained focused on its product development and customer delivery.

Beyond 2019, Figure Eight will be fully integrated into the Appin business. It is expected the two companies will produce combined annual revenue of around AU$405.8 million.

The deal is expected to be finalised by early next month.

Appin in November 2017 acquired another Californian firm, Leapforce, for $80 million. Leapforce specialises in "search relevance".

It followed the company in 2016 scooping up UK-based transcription service Mendip Media.

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