RedBalloon founder Naomi Simson has become embroiled in a legal battle with Wotif.com, after claiming that she and her husband are owed more than $4 million for their previous venture GoDo, which was bought by Wotif in 2009.
Established in 2006 as part of Simson’s RedBalloon Group, GoDo provided a real-time online booking service for things to do in Australia and New Zealand.
It sold these activities direct via its website, and via a network of affiliate sites and third party distributors.
In December 2009, travel booking website Wotif.com announced it had entered into an agreement to acquire all the issued shares in GoDo from RedBalloon.
At the time, Wotif refused to disclose the purchase price for the transaction “due to the level of acquisition consideration not being of a material amount”.
But according to a report by BRW, the initial purchase price for all of GoDo’s shares was $2.238 million.
However, the deal included an “earn-out” provision, which meant Simson and her husband Peter would be paid an adjusted total price after the first 12 months following the acquisition.
This would be dependent on the performance of GoDo.
Simson said at the time she was pleased GoDo had been acquired by Wotif, which she described as a “world class entrepreneurial organisation” operating in the travel space.
“There is a great cultural fit between the businesses and offers great synergies for both parties,” Simson said in a statement.
But now the Simsons are in the midst of a legal stoush with Wotif.com in the NSW Supreme Court.
They claim Wotif owes them $4.082 million for the purchase of their shares in GoDo. But Wotif claims it only owes $350,000.
This was based on a post-completion earnings before interest, taxes, depreciation and amortisation (EBITDA) calculation of $24,271.
According to the Simsons, this was an “enormous” drop in EBITDA, which it projected at $632,000 for 2010.
The minimum adjusted purchase price on the share sale agreement was $1.9 million at a minimum and $8 million maximum.
Before the buyout, GoDo’s EBITDA was valued at about $632,000 based on its prior trading history, but GoDo’s performance in the first 12 months was below expectation.
According to the Simsons, Wotif absorbed their site into its own business and failed to provide them with accounts on which to calculate the adjusted purchase price.
They also claim changes made to the site resulted in fewer transactions.
The NSW Supreme Court has granted leave for the Simsons to re-plead, with their comments described as “disparate” and needing “further information”.
Naomi Simson and Wotif.com were contacted by StartupSmart but declined to comment.