Embargo: 1 September 2016
This announcement contains inside information
Acquisition of Bloom Media (UK) Limited
Placing to raise £3 million
Jaywing plc (AIM: JWNG) ("Jaywing" or the "Company"), a UK-based agency specialising in the application of data science, is pleased to announce that it has entered into an agreement to acquire the entire issued share capital of Bloom Media (UK) Limited ("Bloom") (the "Acquisition"), a digital marketing agency based in Leeds.
Initial consideration of £2.41 million is payable to the vendors of Bloom ("Vendors"), on a cash and debt free basis, and will be financed from funds raised through a placing with new and existing investors (the "Placing") and from new bank debt of £1.0 million. Additional earn-out consideration of up to £5.75 million is payable to the Vendors, subject to performance criteria, over a two year period ending March 2018 and will be satisfied through the Company's own cash resources and debt. Jaywing will apply part of the placing proceeds towards investment in a newly formed joint-venture over the next two years. The joint venture will be responsible for developing the enlarged Company's data product set, supported by Bloom's existing management team.
The Acquisition is expected to be earnings enhancing within 12 months from completion.
The Placing will raise £3 million before expenses (the "Placing Proceeds") through the issue of 10,000,000 new ordinary shares of 5 pence each (the "Placing Shares") at 30p per share (the "Issue Price").
An Application has been made for the Placing Shares to be admitted to trading on AIM, which is expected to occur at 8.00 a.m. today ("Admission"). The Placing and Acquisition are conditional on Admission. Following Admission, the Company will have 86,259,763 ordinary shares in issue carrying voting rights. The Company has an additional 99,662 ordinary shares held in Treasury. Following Admission, this figure (86,259,763) may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority's Disclosure Rules and Transparency Rules.
The Company confirms that its current trading is in line with market expectations after an encouraging start to the year.
Background to and reasons for the Acquisition
Jaywing's strategy is to create a low risk international growth platform through the development and distribution of data science-led products. Following its recent acquisition of Australian based search marketing agency, Digital Massive Group Pty, Jaywing has sought to broaden and enhance its product set, which focuses on data science.
The Acquisition of Bloom is expected to accelerate the Company's strategy and will provide Jaywing with a suite of innovative digital products, including a social media and behavioural analytics tool. The Acquisition also brings significant expertise to the Company. Alex Craven, founder of Bloom, will remain employed in the business and will be responsible for leading the development of the Company's enlarged product set.
The Acquisition will increase Jaywing's scale in digital marketing in the UK and is expected to provide opportunities to cross-sell existing products and services into the Bloom client base.
Bloom, based in Leeds, provides a range of digital marketing services similar to those already provided by Jaywing and has developed a suite of data science-led digital products ("Bloom Intelligence") that it has sold into its client base and uses as its primary vehicle for attracting new clients.
Bloom's products include 'Whisper', a real-time behavioural insight tool for analysing social media data using algorithms developed in association with Peter Grindrod CBE who is Professor of Mathematics at the University of Oxford. Whisper has been used by over 25 national and global brands in its most recent financial year.
The Company's clients include a broad range of blue-chip companies such as ADT, Anytime Fitness, Arco, Sky, Ebuyer, SIG and Yorkshire Building Society. Bloom was founded in 2006 by Alex Craven who will remain employed in the business going forward.
For the 12 months ended 29 February 2016, Bloom generated gross profit and profit before tax of £1,943,000 and £279,000 respectively. As at 29 February 2016, Bloom had gross assets of approximately £760,000*. Bloom's financial performance for the 12 months ended 29 February 2016 was impacted by an historic aborted sale process and a subsequent restructuring of the business. During its financial year ended 28 February 2015, Bloom generated gross profit of £2,061,000 and profit before tax of £411,000*. Bloom's performance for the first five months of the current period is tracking ahead of this with gross profit of £1,149,000 and profit before tax of £282,000.
* Based on Bloom's audited accounts. ** Based on unaudited management accounts.
The Placing is not underwritten. The Placing Agreement contains certain warranties and indemnities from the Company in favour of Cenkos and is conditional, inter alia, upon Admission becoming effective not later than 8.00 a.m. today or such later time and/or date as the Company and Cenkos may agree, being not later than 15 September 2016.
Consideration and structuring
Jaywing has acquired the entire issued share capital of Bloom for an upfront cash consideration of £2.41 million on a cash and debt free basis. Additional earn-out consideration of up to £5.75 million is payable to the Vendors, subject to performance criteria, over a two-year period ending 31 March 2018 and will be satisfied through the Company's own cash resources and debt.
A new subsidiary company ("Newco"), of which Jaywing will own 75%, has been incorporated and into which Jaywing will make a capital investment of £637,500 over a period of two years . Certain of the Vendors, comprising certain of Bloom's existing management team ("Bloom Management") will hold the remaining 25 per cent., having transferred into Newco the suite of Bloom Intelligence products. Newco will be led by Alex Craven who will be responsible for developing and monetising all of Jaywing's data science-led products..
Bloom Management will be granted a put option to sell their stake to Jaywing for 2.0 times the average audited maintainable EBITDA for the financial years ending March 2019 and March 2020 subject to a maximum of £4 million for the 25 per cent. stake. Jaywing will also have a call option to acquire the 25 per cent. stake under the same terms and the time period over which the average EBITDA is taken may be moved further into the future by mutual agreement. Jaywing may choose to pay up to 25 per cent. of the additional consideration as shares.
Use of Proceeds
In addition to the £1 million of debt drawn, the proceeds of the Placing will be used as follows:
· £2.3 million upfront consideration for the Acquisition;
· £0.7 million investment in Newco for product development;
· £0.5 million on legal, accountancy and transactions costs; and
· £0.5 million removal of extended temporary bank overdraft for recent acquisition of Digital Massive.
Commenting on the deal, Martin Boddy, said: "This acquisition is a fundamental building block in our strategy to distribute data science-led products internationally. It gives us additional products and an experienced individual to lead that part of our business. Alex and his team are a great cultural fit and I'm absolutely delighted to have them as part of the team."
Alex Craven, CEO at Bloom, added: "Jaywing's impressive data science credentials and its product strategy are very exciting to me personally. In addition, the breadth and scale of Jaywing's client base as well as its recent acquisition in Australia provide an ideal platform for the Bloom Intelligence suite. I look forward to a rewarding future with Jaywing."
Jaywing plc (www.jaywingplc.com)
Michael Sprot (Company Secretary) Tel: 0114 281 1200
Cenkos Securities plc
Nicholas Wells/Ivonne Cantú/Callum Davidson (Nomad) Tel: 0207 397 8920
This information is provided by RNS