TIDMELE
RNS Number : 4964J
Electric Word PLC
18 December 2015
18 December 2015
Electric Word plc
Proposed sale of 70 per cent. interest in iGaming Business
Limited
Electric Word plc (AIM: ELE, "Electric Word", the "Company")
today announces that it has conditionally agreed to sell its
indirect 70 per cent. shareholding in iGaming Business Limited
("iGB"), to Clarion Events Limited ("Clarion"), a global events
business with a portfolio of event and media businesses across a
range of vertical markets. The Sale values the whole of iGB on a
cash free debt free basis at GBP19.7 million. The holder of the
remaining iGB Shares, Michael Caselli, has also agreed to sell 5.1
per cent. of the issued iGB Shares and will retain the balance.
Highlights
-- Conditional sale of 75.1 per cent. of the shares of iGB, 70
per cent. by SBG, a wholly-owned subsidiary of Electric Word (who
holds 70 per cent. of iGB), and 5.1 per cent by Mr Caselli (who
holds 30 per cent. of iGB), which values the whole of iGB on a cash
free debt free basis at GBP19.7 million.
-- The Gaming Interests generated 2014 revenues of GBP5.4
million and 2014 EBITDA of GBP2.0 million after allocation of
central costs.
-- The base cash consideration payable to SBG of GBP13.8 million
will be adjusted to reflect SBG's share of Net Debt and Net Working
Capital at Completion.
-- Net cash proceeds of the Sale receivable by SBG on Completion
are expected to be GBP12.2 million.
-- Electric Word considers that iGB's potential can best be
realised within a business with a larger events portfolio and
online gaming, which is the focus of iGB's business, has a
different risk profile than that faced by the Group's other
operations.
-- The Sale is also in line with the Existing Group's strategy
of concentrating on a smaller number of markets to enable the
Existing Group to make more focused investments in developing
higher-value digital products and related services.
-- The Board is considering making a capital return to shareholders.
-- The Sale is, inter alia, subject to Shareholder approval.
A circular will be distributed to Shareholders as soon as
practicable ahead of a General Meeting convened to seek the
approval of Shareholders for the Sale, which is expected to take
place at 10.00 a.m. on 4 January 2016, and will shortly be
available on the Company's website at www.electricwordplc.com.
Julian Turner, Chief Executive of Electric Word, said:
"I am delighted that we have reached agreement to sell iGB to
Clarion at an attractive valuation. iGB has performed exceptionally
well in recent years, led by a talented management team and
exceptional staff. I would like to thank them for their excellent
work over ten years as part of Electric Word and I strongly believe
that both they and the business will continue to thrive under
Clarion's ownership."
Enquiries
+44 (0) 20 7265
Electric Word plc 4170
Julian Turner, Chief Executive
William Fawbert, Finance Director
Trillium Partners Limited (Financial +44 (0) 20 3008
adviser to Electric Word) 8375
Philip Mastriforte
Andrew Zelouf
Panmure Gordon (UK) Limited (Nominated
adviser and broker to Electric +44 (0) 20 7886
Word) 2500
Andrew Potts
Notes to Editors
Electric Word plc is a specialist media group supporting
professional education, compliance and management through a wide
range of digital, paper and live formats. Its approach is to
identify niche communities within its market sectors and fulfil
their key information, professional development, best practice and
compliance needs.
Increasingly, its aim is to provide higher-value services and
decision-critical data that help its customers to achieve their key
personal and organisational objectives. It achieves this by
developing a deep understanding of its sectors and its customers'
challenges and critical information requirements.
Electric Word provides content in many different formats,
including subscription websites, journals, magazines, events,
face-to-face training, online training, books, special reports,
bespoke research and consultancy. Competencies developed in one
sector can then be transferred to another as opportunities
arise.
Trillium Partners Limited, which is authorised and regulated in
the United Kingdom by the Financial Conduct Authority, is acting
exclusively for Electric Word plc and no one else in connection
with the matters referred to in this announcement and apart from
the responsibilities and liabilities, if any, which may be imposed
on Trillium Partners Limited by the Financial Services and Markets
Act 2000 and the regulatory regime established thereunder, Trillium
Partners Limited will not be responsible to anyone other than
Electric Word plc for providing the protections afforded to clients
of Trillium Partners Limited or for providing advice in relation to
the matters referred to in this announcement.
Panmure Gordon (UK) Limited, which is authorised and regulated
in the United Kingdom by the Financial Conduct Authority, is acting
exclusively for Electric Word plc and no one else in connection
with the matters referred to in this announcement and apart from
the responsibilities and liabilities, if any, which may be imposed
on Panmure Gordon (UK) Limited by the Financial Services and
Markets Act 2000 and the regulatory regime established thereunder,
Panmure Gordon (UK) Limited will not be responsible to anyone other
than Electric Word plc for providing the protections afforded to
clients of Panmure Gordon (UK) Limited or for providing advice in
relation to the matters referred to in this announcement.
Proposed sale of 70 per cent. interest in iGaming Business
Limited
1. Introduction
Electric Word announces today that its wholly-owned subsidiary,
SBG, has entered into a conditional agreement with Clarion pursuant
to which SBG has agreed to sell its 70 per cent. shareholding in
iGB to Clarion. The holder of the remaining iGB Shares, Michael
Caselli, has also agreed to sell 56,100 iGB Shares to Clarion,
representing 5.1 per cent. of the issued iGB Shares, and will
retain the balance.
The Transaction values the entire issued share capital of iGB on
a cash free debt free basis at GBP19.7 million.
The base cash consideration payable to SBG of GBP13.8 million
will be adjusted by SBG's share of Net Debt and Net Working
Capital, to be calculated through a completion accounts process.
After taking into account the Group's costs associated with the
Sale and the repayment of an intercompany balance owing by the
Continuing Group to iGB, it is expected that the net proceeds of
the Sale receivable by SBG on Completion will be approximately
GBP12.2 million.
Pursuant to Rule 15 of the AIM Rules, the Sale is deemed to
constitute a fundamental change of business of the Company, which
requires the approval, by way of an ordinary resolution, of the
Shareholders at the General Meeting.
2. Background to and reasons for the Sale
The Company acquired SBG in early 2006 for GBP2.7 million, and
included as part of the acquisition was a controlling interest in
iGB. iGB has grown strongly since 2006, particularly since
developing a magazine and a series of conferences aimed at gaming
affiliates with the assistance of a US-based joint venture partner,
Affiliate Media. Affiliate Media provided marketing support for the
iGB affiliate business in return for a share of the net profit from
the joint venture pursuant to the terms of the Affiliate Contract.
In January 2011, SBG bought Affiliate Media out of its benefits and
obligations under the Affiliate Contract. Following the Sale, SBG
will no longer be in a position to fulfil its obligations under the
Affiliate Contract, which will therefore be terminated on
Completion for no consideration. After Completion, SBG will receive
no further share of the net profit from the Affiliate Contract.
Given the Existing Group's controlling 70 per cent. interest in
iGB, the results of iGB are consolidated as part of the Existing
Group's financial statements, and the 30 per cent. interest in iGB
held by Mr Caselli has been reflected as a non-controlling interest
in the Existing Group's consolidated income statement.
For the year ended 30 November 2014, the Gaming Interests
generated revenues of GBP5.4 million and EBITDA of GBP2.0 million
after allocation of central costs. These figures are unaudited and
have been extracted from the Existing Group's consolidated
financial statements for the year ended 30 November 2014.
Over the last four years, the gaming events business has grown
significantly. With the majority of the profits of the Gaming
Interests now derived from the events business, the Directors
consider that the potential of the business can best be realised
within a business with a larger events portfolio. The Directors are
also of the view that online gaming, which is the focus of iGB's
business, has a different risk profile to that faced by the
Existing Group's other operations.
The Directors have carefully considered the risks and rewards
associated with the Group's ownership of its Gaming Interests. The
Directors have been pleased with the historic performance of the
Gaming Interests but believe the Sale provides an opportunity to
realise its 70 per cent. shareholding in iGB at a valuation that
the Directors believe is attractive at this time.
The Sale is also in line with the Existing Group's strategy, as
set out in its annual report and accounts for the year ended 30
November 2014, of concentrating on a smaller number of markets to
enable the Existing Group to make more focused investments in
developing higher-value digital products and related services.
(MORE TO FOLLOW) Dow Jones Newswires
December 18, 2015 02:00 ET (07:00 GMT)
The Gaming Interests and SBG together comprise the Existing
Group's Sport & Gaming division. SBG provides business insight,
data and analysis to professionals in the global business of sport
as well as owning the Gaming Interests. SBG will continue to be
part of the Continuing Group after Completion.
For the year ended 30 November 2014, iGB's statutory accounts
showed a profit before taxation of GBP0.7 million and, at 30
November 2014, iGB had gross assets of GBP6.7 million and net
assets of GBP0.8 million. These numbers take account of the net
profit payable to SBG under the Affiliate Contract (and therefore
do not include all profits from the Gaming Interests) and fees
payable for the Existing Group's management services.
3. Strategy following Completion
Following Completion, the Directors will continue developing the
Continuing Group's operations in the sport, education and health
markets, investing in new products and services. Future growth is
expected to be driven by investment in both technology and people
to build a business based on deep market knowledge and high-value
solutions to key customer needs.
Following Completion, the Continuing Group will have exited from
the gaming market. In addition, with the sales of Radcliffe
Solutions Limited and Radcliffe Publishing Limited in 2015 and the
Sports Performance business in 2014, the Health division is now
solely focused on the Speechmark publishing business which serves
both the Health and Education markets. In order to simplify its
future financial reporting, the Continuing Group will report
Speechmark as part of the Education division and thus the
Continuing Group will report on three business divisions, namely
Sport, Education and Central costs.
The Sport division provides subscription websites and magazines
for sports industry professionals who work in governing bodies, the
media, sports marketing, sponsorship and club and event management,
and its brands include SportBusiness and TV Sports Markets.
The Education division consists of Optimus Education and,
following Completion, Speechmark. The Optimus Education brand
supports the professional development of teachers and school
leaders through an online subscription-based information and
training service and through live conferences. Speechmark
specialises in resources for speech therapists, special needs
co-ordinators and teachers. The Board has commissioned an external
review of growth opportunities in the education sector.
The Continuing Group's revenues for the year ended 30 November
2014, on a proforma basis, would have been GBP7.1 million. This
figure is unaudited and has been prepared for illustrative purposes
only. The Continuing Group's Adjusted EBITDA for the year ended 30
November 2014, on a proforma basis, would have been a loss of
GBP1.4 million. This figure is unaudited and has been prepared for
illustrative purposes only. Following Completion, the Board will
seek to restore the Continuing Group to profitability in the medium
term through investment in both its Sport and Education divisions
and management of central costs.
On a proforma basis, to illustrate the effect on the net cash
position of the Continuing Group had Completion occurred on 31 May
2015 and, thereby, included the GBP12.2 million net proceeds
receivable by SBG from the Sale, the Continuing Group would have
had gross cash of GBP12.4 million and net cash of GBP12.2 million.
These figures are unaudited and have been prepared for illustrative
purposes only.
4. Use of proceeds
It is expected that the net cash proceeds receivable by SBG on
Completion will be GBP12.2 million.
The Board believes that the Company's existing operations in
Sport and Education remain valuable and that the Continuing Group
would benefit from further investment into these divisions.
However, the Board is mindful that the Continuing Group's
proforma net cash balance following Completion may be in excess of
the Company's expected capital requirements for the foreseeable
future. The Board therefore is currently giving consideration to
making a capital return to Shareholders, but this remains subject
to further analysis of the Continuing Group's cash requirements and
further growth opportunities, as well as the structure of any such
distribution. The Board has commenced discussions with its advisers
to explore ways by which this can be achieved most effectively and
efficiently for Shareholders and will provide an update in due
course. In the event of a distribution to Shareholders, the
Company's remuneration committee may consider amending the terms of
the Company's share option schemes. Shareholders and potential
investors should note that a potential distribution may or may not
occur, and accordingly are advised to exercise caution when dealing
in the Ordinary Shares.
5. Current trading and prospects
Current trading for the Existing Group for the year to 30
November 2015 is in line with the Board's expectations. The Gaming
Interests have exceeded the Board's expectations and central costs
have been lower than anticipated. In the Education business, the
conferences in particular have had a more difficult year and
profits will be below the Board's expectations. The Sport and
Health businesses are likely to be in line with expectations.
6. Information on Clarion
Clarion is a global events business with a portfolio of event
and media businesses across a range of vertical markets.
7. Summary of the Sale Agreement
Pursuant to the Sale Agreement, the Company and Mr Caselli have
agreed to sell 826,100 iGB Shares in aggregate, representing 75.1
per cent. of the issued iGB Shares for a total gross cash
consideration of GBP14.8 million on a cash free debt free basis
payable on Completion. The gross consideration of GBP14.8 million
will be adjusted by the amount of Net Debt and Net Working
Capital.
The Company has also agreed to enter into a transitional
services agreement pursuant to which it has agreed to allow the
employees engaged in the business of iGB to continue to work at its
premises and to provide certain IT services, office services and
website services, which will be charged at cost. The obligations on
the Company under this agreement will terminate on 30 April 2016 at
the latest.
Completion is conditional upon approval by Shareholders of the
Sale at the General Meeting and completion by SBG of the Transfer
Documents. Shareholders should note that completion of the Transfer
Documents is within the control of the Company. Clarion may
terminate the Sale Agreement in certain circumstances.
A summary of the principal terms of the Sale Agreement is set
out below.
8. Related party transaction
Trillium Partners, which has acted as the Company's financial
adviser in relation to the Sale, is a specialist media advisory
firm, in which voting control of 50.0 per cent. is held by Stephen
Routledge, a non-executive Director of the Company, and as such is
a related party. Accordingly, the Independent Directors consider,
having consulted with Panmure Gordon, its nominated adviser, that
the fees of GBP0.5 million payable to Trillium Partners in relation
to the Sale are fair and reasonable insofar as the Shareholders are
concerned.
9. Irrevocable undertakings
The Company has received irrevocable undertakings to vote in
favour of the Resolution from Shareholders representing
approximately 71.22 per cent. of the Company's Existing Shares.
10. Directors' recommendation
The Independent Directors believe that the Sale is in the best
interests of the Company and Shareholders as a whole and
unanimously recommend the Shareholders vote in favour of the
Resolution as they intend to do in respect of their own beneficial
holdings amounting, in aggregate, to 19,850,275 Ordinary Shares,
representing approximately 4.87 per cent. of the Existing
Shares.
Summary of the principal terms and conditions of the Sale
Agreement
The Sellers have agreed to sell, and Clarion has agreed to
purchase, 826,100 iGB Shares, representing 75.1 per cent. of the
issued iGB Shares, pursuant to the Sale Agreement. The key terms of
the Sale Agreement are as follows:
Consideration
The Sellers and Clarion have agreed a price of GBP14.8 million
for the Sale Shares, on a cash free debt free basis. The
consideration is subject to adjustment following the agreement or
determination of the completion balance sheet of iGB and its
Subsidiary, iGaming Business North America Inc., as at Completion
to determine Net Debt and Net Working Capital. The Completion
Accounts are to be prepared by the Sellers no later than 30 days
after Completion. After that review has been completed, the Sellers
will deliver the completion balance sheet and related documents to
Clarion for review and agreement or determination.
Based on the parties' estimate of Net Debt and Net Working
Capital, Clarion will pay GBP15.7 million in aggregate to the
Sellers on Completion. There will then be a balancing payment
following agreement of the Completion Accounts.
Condition
Completion is conditional upon the passing of the Resolution by
the Shareholders and completion of the Transfer Documents.
Conduct Covenants
The Sellers have agreed not to carry out certain actions in
relation to iGB ("Conduct Covenants") in the period between the
date of the Sale Agreement and Completion without the consent of
Clarion.
Warranties, Indemnities, Tax Covenant
The Sellers have given certain warranties in relation to iGB and
iGaming Business North America Inc., which are usual for this type
of transaction, other than in relation to tax and accounts, which
only SBG is giving.
The Sale Agreement also contains a tax covenant in favour of
Clarion which includes customary provisions relating to the tax
affairs of iGB and its Subsidiary as at Completion.
(MORE TO FOLLOW) Dow Jones Newswires
December 18, 2015 02:00 ET (07:00 GMT)
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