By Vincent Wess, Emil Widdig, Julius Kalvelage (WHU – Otto Beisheim School of Management), Constantin Wells, Rayan Singh, Luca Poeschl (University of St. Gallen) and Cameron Caldwell (University of Glasgow)
Overview of the deal
Implied Equity Value: N/A
Total Transaction Size: $840m
Closed Date: May 4th, 2020
Target Advisor: N/A
Intel has acquired the Israel-based trip planning app and Mobility-as-a-service (MaaS) provider Moovit. Moovit was valued at $900 million net of their first investment in the company in February 2018, Intel acquired the remaining stake for approximately $840 million. As an add-on acquisition, Moovit is complementary to Intel’s 2017 $15.3 billion acquisition of Mobileye, another Israeli firm that is active in the design and development of camera-based Advanced Driving Assistance Systems (ADAS). Mobileye’s business model encompasses the entire automated driving value chain, and the latest deal illustrates Intel’s overlying strategy to become a fully integrated mobility provider. Upon integration, Intel plans to advance its MaaS strategy to strengthen its global position in the autonomous transportation field.
“Mobileye’s ADAS technology is already improving the safety of millions of cars on the road, and Moovit accelerates their ability to truly revolutionize transportation – reducing congestion and saving lives – as a full-stack mobility provider”
Bob Swan, Intel CEO
Company Details (Acquirer - Intel)
Intel is engaged in the designing, manufacturing, and selling processes for computer components and related products. As the world's largest semiconductor chip fabricant, it is serving primarily computing and communication clients. The company offers a wide variety of software and hardware solutions, although primarily being renowned for dominating the processor market. Adapting to the pace of innovation, Intel declares itself to unleash the potential of data to provide the most efficient use of disruptive technologies such as Artificial Intelligence, 5G network transformation or Mobility-as-a-service platforms.
Founded in: 1968
Headquartered in: Santa Clara, California
CEO: Bob Swan
Number of Employees: 110,800 (2019)
Market Cap: $261.24bn (28/05/2020)
EV: $283.06bn (29/05/2020)
LTM Revenue: $75.73bn
LTM EBITDA: $36.71bn
LTM EV/Revenue: 3.74x
LTM EV/EBITDA: 7.71x
Company Details (Target - Moovit)
Moovit is a MaaS app that enables users to plan and pay for trips within one app. It’s real-time trip planning feature means people can travel places faster using the least congested mode of public transport. Since its launch in 2012, the app has amassed over 800 million users across all platforms, increased its awareness by launching in 3,200 cities across 103 countries, and has been globally recognised after winning the #1 Public Transit App award in 2020. They also offer AI-powered mobility solutions for governments, cities and other organisational customers.
Founded in: 2012
Headquartered in: Ness Ziona, Israel
CEO: Nir Erez
Number of Employees: 210
Market Cap: N/A (private company)
EV: $450m (as of 2015)
LTM Revenue: N/A
LTM EBITDA: N/A
LTM EV/Revenue: N/A
LTM EV/EBITDA: N/A
Projections and Assumptions
Moovit plays a crucial role in Intel’s continued efforts to become an industry leader in mobility and autonomous driving. The key is to integrate Moovit into Mobileye, an autonomous vehicle hardware-manufacturing startup that Intel acquired for a fully-diluted equity value of $15 billion in 2017. The deal underlines Intel’s shift to utilising its competencies in new and high growth markets to build upon its sole supremacy in the hardware industry. Since Intel’s acquisition of Mobileye, the startup has become Intel’s central pillar to explore the future of mobility and transportation. Even though Mobileye is a leading company in autonomous driving and Advanced Driver Assistance Systems, it lacks essential resources such as mobility users and partner networks.
One of the value-adding resources that Moovit will bring to Mobileye is the vast amount of data that Moovit has collected since its foundation in 2012. Currently, Moovit collects over 5 billion data points, for example on user behaviors and existing infrastructure availability, from a variety of cities each day. According to Intel, “Mobileye will be able to use Moovit’s large proprietary transportation dataset to optimize predictive technologies based on customer demand and traffic patterns.” Moovit also boasts 450,000 so-called Mooviters that act as local editors, mapping public transport networks. Furthermore, the acquisition of Moovit allows Intel access to Moovit’s underlying assets: its 200+ employees, who Intel will pay an additional $100 million to retain for a set period, and most importantly, its vast partner network which includes the likes of Microsoft and TomTom.
The completion of the acquisition will also reduce uncertainties in the cooperation of the two companies. Intel and Moovit have already been in cooperation since 2018, when Intel led a funding round worth $50 million. Mobileye’s CEO Amnon Shashua has been sitting on the board of Moovit ever since. The acquisition of Moovit is the logical next step for Intel to complete their integrated MaaS product offering and target a debut in 2022.
The key long-term upside in the acquisition of Moovit is the enhanced ability for Intel to compete in the robotaxi market, which is estimated to be worth $160 billion in revenues by 2030. If Moovit’s vast data offerings are able to significantly contribute to Mobileye’s autonomous driving technology, Intel would immediately have an advantage over competitors to acquire robotaxi customers, which would likely contribute to long-term dominance. Acquiring customers early within the mobility space is particularly crucial, because the market has significant first-mover advantages resulting from strong positive network effects and brand power; it will be hard for competitors to catch up once one player has a dominant market position because of access to data and the customer convenience of having only one or a few large players.
MaaS technologies alone are projected to be an opportunity worth more than $34.5 billion in revenues by 2030. Moovit currently has tremendous scale and recent growth on its platform, with more than 800 million users and seven-fold user growth over the last 24 months. There are significant revenue synergies related to the integration of the robotaxi offering into the Moovit platform as a classic cross-sale case through Moovit’s valuable brand and distribution channel, which will be retained despite the full integration of Moovit into Mobileye. The integration also extends as a future revenue driver for Moovit as robotaxis become increasingly integrated in daily commutes.
As it stands, Moovit's ability to link different transportation methods altogether, through effective trip-planning algorithms and the obtainment of real time data, is unparalleled in the market. Given the continuance of beneficial trends such as shared mobility, urbanisation and traffic congestion in the future, it is likely that Moovit's platform will carry on its organic growth in the future. Being predicted to reach its billion user milestone as early as 2021, it is safe to say that Moovit has the potential to cement its long-term value creation through its integration into Intel's autonomous driving push.
Risks and Uncertainties
Intel has only limited know-how in the software segment compared to its competitors in developing self-driving technology, as less than 10% of its 2019 revenues can be accounted to its software services, whilst Intel’s focus lies on its client computing division, which accounts for 52% of its revenue. Whilst more recent acquisitions aimed to strengthen that exact division, Intel has also faced problems in the integration of similar software-based apps, as they were forced to shut down Israeli navigation app Telmap after only two years after its acquisition in 2011.
Moovit’s business model, reliant on its multimodal trip planning ability, will come under pressure in the dynamic mobility industry from tech giant Google. Moovit’s market-leading position is largely due to the ability of their algorithms to plan trips better than their rivals, which is reliant on real-time mobility data from their millions of users. If Google develops superior integration of trip-planning services into Google Maps, Moovit could experience a vicious cycle where less customers lead to less comprehensive data to base algorithms off, resulting in worse trip-planning services, leading to less customers joining the platform. Beyond competition from Google, Moovit also faces challenges from smaller transit mobility apps like Citymapper and Transit, which are more threats to its market share and ability to collect data.
Moreover, other MaaS companies are developing their variety of mobility offerings, evidenced by Uber’s recent investment in scooter company, Lime, with an option to buy between 2022 and 2024. As competitors, like Uber, control more aspects of the mobility experience, the value of Moovit’s role as a coordinator of mobility services is diminished. If any of the risks in Moovit’s business model are realised, it seriously jeopardizes the ability of the firm to provide Mobileye with key mobility data to give them advantages in the heavily competitive self-driving market, which was a main synergistic goal in the acquisition.
From a short-term risk perspective, the impact of the pandemic is also noteworthy. As service reductions from transit agencies and operators are occurring, Moovit has come to understand its underlying reliance on people’s flow and big city traffic the hard way. Uncertainties imposed by Covid-19 are reflected by the rapid 80% fall of public transportation demand around the world, according to their own published data. Although the demand for Moovit’s data and white labelling services still exists, the current situation points out the long-term fragility and unpredictability of their business model. It is also worthwhile mentioning that Moovit was not profitable pre-Covid-19, and after the pandemic its path to profitability is clouded with uncertainty.
Intel, however, doesn’t seem to have any doubt about their purchase, as they’ve progressed with the deal amidst times of global uncertainty. Whilst many competitors in the autonomous vehicle market have postponed IPOs and suspended service temporarily, Intel has seemingly stepped on the gas pedal by signing the deal without even changing the previously negotiated acquisition price, which emphasises its strong beliefs in the underlying long-term strategic rationale of the deal.
“Combining the daily mobility habits and needs of millions of Moovit users with the state-of-the-art, safe, affordable and eco-friendly transportation enabled by self-driving vehicles, we will be able to make cities better places to live in”
Nir Erez, Moovit CEO and co-founder