Reach4Entertainment Enterprises PLC – Acquisition of Agency Press Limited ‘Sold Out’
reach4entertainment enterprises plc (AIM: R4E) the entertainment marketing communications group, today announces its proposed Acquisition of Agency Press Limited (trading as “Sold Out”), an independent full-service advertising agency, which, in part, will be funded by way of a conditional placing. The Company has provisionally placed 250,000,000 new Ordinary Shares at 1.2 pence per share and the Placing will raise gross proceeds for the Company of £3 million.
London-based integrated agency Sold Out, has specialised in arts and entertainment advertising for over 25 years. During this period it has established a strong reputation in its field and built a portfolio of high profile clients, which includes S.J.M. Concerts, AEG Presents, Live Nation and Cirque Du Soleil. Its services include campaign development, media planning and buying, events, partnerships, design and creative, broadcast and digital media production; all of which will bolster r4e’s group offering. In the financial year ended 31 May 2018, Sold Out delivered gross profit of £4.1 million, adjusted EBITDA of £1.7 million and profit before tax of £1.3 million.
The consideration for the Acquisition comprises an initial consideration of £3.94 million payable in cash and £250,000 payable in 20,833,333 Ordinary Shares on completion (the “Initial Consideration”) and additional deferred cash consideration based on the financial performance of Sold Out during the period commencing on 1 June 2017 to 31 December 2021, excluding working capital adjustments (the “Deferred Consideration”). The aggregate of the Initial Consideration and the Deferred Consideration is to be capped at £10 million. The net proceeds of the Placing are to be used to finance the Initial Consideration.
- £3 million raised in Placing with new and existing investors
- Net proceeds of the Placing will be used to finance the acquisition, together with the associated transaction costs
- Sold Out is an independent full-service advertising agency:
– track-record of delivering successful campaigns across multiple genres including live music, festivals, comedy, sport, venues and events
– key clients include S.J.M. Concerts, AEG Presents, Live Nation, Maidwell Marketing, Cirque Du Soleil, EMG, Phil McIntyre Entertainments and Kilimanjaro
- Acquistion of Sold Out is in line with the Group’s strategy to develop a pipeline of new opportunities, both within and outside the live entertainment sector, and will diversify the Group’s client base
- The Board believes that the Acquisition will be substantially earnings enhancing in the first full year of ownership
- The Acquisition will combine Sold Out’s complementary capabilities of specialised advertising and offering principally planning and buying solutions, with r4e’s fully integrated marketing and communications offering covering creative, strategy, website building, ticketing and analytics
Related Party Transactions:
Marc Boyan has agreed to participate in the Placing through Miroma R4E Holdings Limited, a company of which he is a director and controlling shareholder. Marc has subscribed for 8,333,333 Ordinary Shares, amounting to £100,000. Paul Summers and James Charrington who are both directors of subsidiary companies of r4e have also participated in the Placing. Paul Summers has subscribed for 2,083,000 Ordinary Shares, amounting to £24,996 and James Charrington has subscribed for 416,667 Ordinary Shares amounting to £5,000.
As part of the Placing, Nigel Wray, via his investment company, Euroblue Investment Limited and his Charitable Trust, The Priory Foundation, and Herald Investment Management (together, the “Substantial Shareholders”) have each agreed to subscribe for 33,333,333 Placing Shares at the Placing Price.
The participation of Miroma R4E Holdings Limited, Nigel Wray, Herald Investment Management, Paul Summers and James Charrington in the Placing, constitute related party transactions pursuant to Rule 13 of the AIM Rules. Accordingly, the independent Directors (excluding Marc Boyan), after having consulted with the Company’s nominated adviser, Grant Thornton, consider that the terms of subscription to Placing Shares by Miroma R4E Holdings Limited, Nigel Wray, Herald Investment Management, Paul Summers and James Charrington are fair and reasonable insofar as Shareholders are concerned.
With the consent of r4e’s existing debt provider, the Initial Consideration will be funded in part by way of a £500,000 loan provided by In The Loop Limited, a company of which Marc Boyan, the CEO of r4e, is the ultimate beneficial owner. The loan bears interest at 5 per cent. accruing over a period of 5 years. The debt is unsecured and is to be subordinated to the Company’s existing facility. The Independent Directors (excluding Marc Boyan), after having consulted with the Company’s nominated adviser, Grant Thornton, consider that the terms of the loan are fair and reasonable insofar as Shareholders are concerned.
Following Admission, Marc Boyan will be interested in 135,000,002 Ordinary Shares, representing approximately 10.6 per cent. of the Enlarged Share Capital, Mr Wray will be interested in 228,959,503 Ordinary Shares and a non-beneficial interest in 25,000,000 Ordinary Shares, representing approximately 19.8 per cent. of the Enlarged Share Capital and Herald Investment Management will have an interest in 184,006,824 Ordinary Shares, representing approximately 14.4 per cent. of the Enlarged Share Capital.
Lord Michael Grade, Chairman of R4E, commented: “The acquisition will mark a significant milestone for the Group and play a major role in diversifing our client base beyond just theatre. Sold Out has built an excellent reputation within the entertainment sector and has a high-quality, long term client base to match. It has delivered many successful campaigns across live music, festivals, sports and events, which are all areas where r4e is seeking to move in to. Bringing Sold Out into the Group will enable us to strengthen our entire marketing and advertsing offering.”