TIDMBLNX
RNS Number : 7571R
Blinkx Plc
09 November 2011
9 November 2011
ACQUISITION
OF
PRIME VISIBILITY MEDIA GROUP, INC.
BY
BLINKX PLC
AND
TRADING STATEMENT
Integrating the world's largest video search engine with a
leading text search platform
The Boards of blinkx plc (AIM:BLNX), the world's largest video
search engine ("blinkx" or the "Company") and Prime Visibility
Media Group, Inc., a leading online performance advertising network
and digital marketing agency ("PVMG") are pleased to announce today
that they have entered into a definitive stock purchase agreement
(the "Purchase Agreement") pursuant to which blinkx has acquired
the entire issued and to be issued shares of common stock and the
entire issued and to be issued shares of preferred stock of PVMG
(the "PVMG Shares") for an aggregate consideration of US$36 million
(GBP22.4 million), to be satisfied in cash (the "Acquisition").
The Acquisition consideration of US$36 million (GBP22.4 million)
will be funded through blinkx's existing cash balances and the
proceeds from a proposed placing of new ordinary shares in the
capital of the Company (the "Placing") announced separately today.
A separate announcement is being issued by the Company this morning
which will contain details of the Placing.
In the event that the Placing does not complete for any reason,
the Acquisition will be funded entirely from the Company's existing
cash balances.
Further details of the Acquisition are set out in the Appendix
to this document.
Transaction Highlights
-- PVMG's network averages over 600 advertisers (measured over
the 6 month period to 30 September 2011) and 350 publishers.
Processing 1.5 billion queries, and generating 14 million ad
interactions every day, PVMG has the reach and volume to meet the
demands of metric-driven advertisers and enables publishers to
monetise their traffic from multiple forms of advertising.
-- Following the Acquisition, blinkx expects to integrate PVMG's
platform with blinkx's so as to enable the blinkx video search
engine to respond to a portion of PVMG's 1.5 billion daily queries
with relevant video results. Where available these videos can be
paired with rich media video ads that typically monetise at a
higher rate.
-- In September 2011, the average effective cost per mille
(eCPM) of PVMG's sponsored text advertisements was approximately
US$5.00, while blinkx's standard untargeted sponsored video
advertisements were priced at US$13.00. blinkx believes that the
combined group will be able to realise some of the differential
between these two rates to generate incremental revenue.
-- PVMG also operates a digital marketing agency which offers
consulting services to assist customers in developing Internet
marketing strategies to establish and enhance their digital
presence, through Search Engine Optimisation (SEO), Search Engine
Marketing (SEM), social media, email and mobile marketing
services.
-- Following the Acquisition, blinkx expects that the agency
business will provide useful insights into its brands' Internet
marketing strategies, which will enable blinkx to offer more
compelling advertising solutions.
-- PVMG is led by a team of seasoned executives with deep and
diverse expertise in the search, rich media, mobile and agency
sectors of the digital marketing industry. blinkx expects to
benefit from the strategic addition of PVMG's senior leadership in
key areas across its business. PVMG CEO, S. Brian Mukherjee, will
be joining blinkx as EVP and GM for Search and Mobile.
-- PVMG's consolidated audited financial statements for its
financial year ending 31 December 2010 show gross assets of US$22.4
million, and gross revenues of US$29.9 million, and a net loss for
the period of US$389,511 (1) .
-- The integration is expected to begin immediately, and by the
end of the financial year ending 31 March 2013 the Acquisition is
expected to have an annual revenue run-rate of between US$35
million and US$40 million.
Commenting on the Acquisition, Suranga Chandratillake, CEO of
blinkx, said:
"Online video advertising continues to be the fastest growing
format by a significant margin, and is forecast to reach $3.5
billion over the next three years. Brands continue to move an
increasing amount of their TV advertising budgets to online video,
but need to be able to reach an audience of equivalent size on the
Web. We're extremely excited about the Acquisition because the
integration of our video search engine with PVMG's text search
platform will enable us to tap into a new audience of intent-driven
consumers and deliver TV-style brand advertising to them, which
gives us the opportunity to expand our customer reach and increase
PVMG's margins over time."
Commenting on the Acquisition, S. Brian Mukherjee, CEO of Prime
Visibility Media Group, said:
"As a close knit team with the shared sense of optimism to lead
the next revolution of digital advertising, we are proud of our
accomplishments at PVMG. We believe that the Acquisition puts us at
the very heart of one of the most dynamic sectors of the digital
advertising industry - online video. The combination of our
powerful, proven high frequency transaction engine and audience
reach with blinkx's unrivalled video search technology and vast
content index unlocks a tremendous opportunity for us to develop
high value online video advertising solutions."
blinkx Current Trading
Trading for the first half of the financial year ending 31 March
2012 has been strong. For the half year period to 30 September
2011, the Company expects to report revenues of approximately
US$44.6 million, an increase of over 60% from the corresponding
period ended 30 September 2010, and to report EBITDA for the half
year of approximately US$5.7 million(2) and an operating profit for
the half year of approximately US$4.9 million(3) , an increase of
approximately 95% over the corresponding period ended 30 September
2010. For the half year period to 30 September 2011, blinkx expects
to report cash and cash equivalents of approximately US$52.9
million. blinkx is pleased to report that the integration of Burst
Media Corporation is proceeding very well. blinkx expects that the
cost of restructuring will be approximately US$2.5 million; less
than the market predicted US$4.5 million. The Company has also seen
continued growth of the AdHoc advertising platform with new brands,
including Kelloggs, Disney, Pimms and Nivea. blinkx expects to
announce its half year results on 11 November 2011.
(1) PVMG's consolidated financial statements for the year ending
31 December 2010 have been prepared in accordance with US GAAP, and
have not been reconciled with blinkx's own financial statements
(2) US$3.8 million after Burst related acquisition costs of
US$1.9 million.
(3) US$1.4 million after Burst related acquisition costs of
US$1.9 million and amortisation on purchased intangibles of US$1.6
million.
PVMG Overview
Established in December 2007, and headquartered in New York, NY,
Prime Visibility Media Group, Inc., is a digital marketing holding
company with three operating units: Prime Visibility, LLC an award
winning search marketing agency; AdOn Network, Inc., a long tail
performance, cost-per-click advertising network; and Predic.tv,
LLC, an early stage rich media advertising company, which intends
to target premium online advertisers and publishers.
Enquiries
blinkx plc +44 (0)1223 488 500
Suranga Chandratillake, Founder and CEO +1 (415) 655 1450
Frances Smith, Company Secretary
Citigroup Global Markets Limited +44 (0)20 7986 4000
(NOMAD and broker to blinkx plc)
Charles Lytle
Christopher Wren
Rowland Bourne
FTI Consulting (formerly Financial Dynamics) +44 (0)20 7831 3113
Edward Bridges
blinkx Overview
blinkx is the world's largest and most advanced video search
engine. Today, blinkx has indexed more than 35 million hours of
audio, video, viral and TV content, and made it fully searchable
and available on demand. blinkx's founders set out to solve a
significant challenge - as TV and user-generated content on the Web
explode, keyword-based search technologies only scratch the
surface. blinkx's patented search technologies listen to - and even
see - the Web, helping users enjoy a breadth and accuracy of search
results not available elsewhere. In addition, blinkx powers the
video search for many of the world's most frequented sites.
blinkx is based in San Francisco, USA. and Cambridge, UK.
Additional Information
This announcement is for information only and, save as expressly
set out herein, does not constitute an offer or invitation to
underwrite, subscribe for or otherwise acquire or dispose of any
securities or investment advice in any jurisdiction in which such
an offer or solicitation is unlawful, including without limitation,
the United Kingdom, the United States, Australia, Canada or Japan.
Persons needing advice should consult an independent financial
adviser.
This announcement has been issued by and is the sole
responsibility of blinkx plc (the "Company"). No representation or
warranty, express or implied, is or will be made as to, or in
relation to, and no responsibility or liability is or will be
accepted by Citigroup Global Markets U.K. Equity Limited or by any
of its affiliates or agents as to or in relation to, the accuracy
or completeness of this announcement or any other written or oral
information made available to or publicly available to any
interested party or its advisers, and any liability therefore is
expressly disclaimed.
Citigroup Global Markets U.K. Equity Limited ("Citi"), which is
authorised and regulated in the United Kingdom by the Financial
Services Authority, is acting for the Company and for no-one else,
and will not be responsible to any other person for providing the
protections afforded to the customers of Citi or in relation to the
contents of this announcement or any other transaction, arrangement
or matter referred to herein.
This announcement is not an offer of securities for sale in the
United States. The securities referred to herein may not be
offered, sold or transferred, directly or indirectly, within the
United States absent registration under the US Securities Act of
1933 (the "Securities Act") or an exemption therefrom. The Company
has not registered and does not intend to register any of the
securities under the US Securities Act. There will be no public
offer of any securities of the Company in the United States.
The price of shares and the income from them may go down as well
as up and investors may not get back the full amount invested on
disposal of the shares.
Neither the content of blinkx's website (or any other website)
nor the content of any website accessible from hyperlinks on
blinkx's website (or any other website) is incorporated into, or
forms part of, this announcement.
Forward-looking Statements
This announcement contains (or may contain) certain
forward-looking statements with respect to blinkx's plans and its
current goals and expectations relating to its future financial
condition and performance and which involve a number of risks and
uncertainties. blinkx cautions readers that no forward-looking
statement is a guarantee of future performance and that actual
results could differ materially from those contained in the
forward-looking statements. These forward-looking statements can be
identified by the fact that they do not relate only to historical
or current facts. Forward-looking statements sometimes use words
such as 'aim', 'anticipate', 'target', 'expect', 'estimate',
'intend', 'plan', 'goal', 'believe', or other words of similar
meaning. Examples of forward-looking statements include, among
others, statements regarding blinkx's future financial position,
income growth, impairment charges, business strategy, projected
levels of growth in its markets, projected costs, estimates of
capital expenditure, and plans and objectives for future operations
of blinkx and other statements that are not historical fact.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances,
including, but not limited to, UK domestic and global economic and
business conditions, the effects of continued volatility in credit
markets, market-related risks such as changes in interest rates and
exchange rates, the policies and actions of governmental and
regulatory authorities, changes in legislation, the further
development of standards and interpretations under International
Financial Reporting Standards ("IFRS") applicable to past, current
and future periods, evolving practices with regard to the
interpretation and application of standards under IFRS, the outcome
of pending and future litigation, the success of future
acquisitions and other strategic transactions and the impact of
competition - a number of which factors are beyond blinkx's
control. As a result, blinkx's actual future results may differ
materially from the plans, goals, and expectations set forth in
blinkx's forward-looking statements. Any forward-looking statements
made herein by or on behalf of blinkx speak only as of the date
they are made. Except as required by the FSA, AIM or applicable
law, blinkx expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statements contained in this announcement to reflect any changes in
blinkx's expectations with regard thereto or any changes in events,
conditions or circumstances on which any such statement is
based.
Exchange Rates
US$ amounts in this announcement have been converted into GBP
Sterling at an exchange rate of US$1.6082 = GBP1, the rate
prevailing at close of business in London on 8 November 2011, the
latest practicable time and date prior to this announcement.
APPENDIX
SUMMARY OF THE PRINCIPAL TERMS OF THE ACQUISITION AGREEMENT
1. Introduction
The Acquisition has taken place today (being "Closing") on the
terms, and subject to the conditions, set out in the definitive
stock purchase agreement (the "Acquisition Agreement") entered into
between the Company, PVMG, the holders of all of the issued
ordinary and preferred stock (the "PVMG Shares") in the capital of
PVMG (together, the "Sellers") and the Sellers' Representative. The
principal terms of the Acquisition Agreement are set out below.
2. Consideration
The Company has paid US$36 million (GBP22.4 million) (the
"Purchase Price") in cash to the Sellers, in consideration for the
acquisition of all of the PVMG Shares, from which the following
amounts have been deducted:
(i) US$921,380, being the aggregate of the MIU Payments, as
defined in this paragraph. Participants in PVMG's management
incentive unit plan ("MIU Participants") were entitled to a payment
for vested management incentive units held by each such MIU
Participant at the date of Closing pursuant to the terms of that
plan (an "MIU Payment"). The Company has agreed to pay to each MIU
Participant his or her MIU Payment on Closing (or on the next
payroll date of PVMG following Closing). The MIU Payment actually
received by a MIU Participant is subject to the deduction of any
applicable taxes and deductions;
(ii) US$1,128,507, being the Unvested MIU Amount, as defined in
this paragraph. The "Unvested MIU Amount" is equal to the amount of
consideration that MIU Participants would have received for
unvested management incentive units if such units had been vested
at the date of Closing. The Company has agreed to pay a portion of
the Unvested MIU Amount to certain of the PVMG employees one year
after the date of Closing provided that each such employee remains
in service with PVMG through such payment date;
(iii) US$435,152.78, being the aggregate amount of the Specified
Payments, as defined in this paragraph. Two former employees of
PVMG agreed at the time of their respective terminations to defer
payment of an amount of their compensation until the time PVMG
underwent a liquidity event or change of control. The Acquisition
triggers the payment of the deferred compensation (the "Specified
Payments"), and the Company has agreed to pay the Specified
Payments directly to the former employees on Closing (or on the
next payroll date of PVMG following Closing, if the Specified
Payments are subject to the deduction of applicable taxes and
deductions);
(iv) US$5,206,248.30, being the Indebtedness of PVMG being paid
at Closing, defined as: (a) any indebtedness for borrowed money;
(b) any obligations evidenced by bonds, debentures, notes or other
similar instruments; (c) any obligations to pay the deferred
purchase price of property or services or deferred management fees,
except trade accounts payable and other current liabilities arising
in the ordinary course of business; (d) any obligations as lessee
under capitalised leases; (e) any indebtedness created or arising
under any conditional sale or other title retention agreement with
respect to acquired property; (f) any obligations; contingent or
otherwise, under acceptance credit, letters of credit or similar
facilities, and (g) any guarantee of any of the foregoing. The
Company paid an amount equal to the Indebtedness to PVMG (or to the
relevant creditor on its behalf) at Closing;
(v) US$3,600,000, being the Indemnity Escrow Funds (as more particularly described below);
(vi) US$200,000, being the Working Capital Escrow Amount (as
more particularly described below);
and
(vii) US$497,595, being the transaction expenses, which were paid by the Company on Closing.
3. Escrow
The Indemnity Escrow Funds, the Working Capital Escrow Amount
and the Unvested MIU Amount have each been paid into an escrow
account (the "Escrow Account") operated by U.S. Bank (the "Escrow
Agent"), and are held by the Escrow Agent pursuant to the terms of
an escrow agreement entered into between the Company, the Sellers,
the Sellers' Representative and the Escrow Agent.
The Indemnity Escrow Funds will be used to satisfy claims by the
Company under the representations and warranties described below.
Within 30 days of the completion of the annual audit of the
financial statements of the Company for the year ending on 31 March
2012 (and in any event no later than 30 June 2012), an amount in
cash equal to 50% of the Indemnity Escrow Funds (after having first
deducted all amounts released from the Indemnity Escrow Funds prior
to such date and the aggregate amount of all claims outstanding
under any notice of claim for breach of the representations or
warranties described below delivered on or prior to such date and
which remain pending on such date) shall be released to the Sellers
from the Escrow Account. Within 30 days of the completion of the
annual audit of the financial statements of the Company for the
year ending on 31 March 2013 (and in any event no later than 30
June 2013) (the "Second Release Date"), the balance of the
Indemnity Escrow Funds (after having first deducted the aggregate
amount of all claims outstanding under any notice of claim for
breach of the representations or warranties described below
delivered on or prior to such date and which remain pending on such
date) shall be released to the Sellers from the Escrow Account.
The Working Capital Escrow Amount will be used to satisfy any
amount by which PVMG's working capital at Closing is calculated (on
the terms set out in the Acquisition Agreement) to be less than
negative US$75,040, in which event the Company shall be entitled to
receive an amount equal to the shortfall from the Working Capital
Escrow Amount and (if the shortfall exceeds the Working Capital
Escrow Amount) the Indemnity Escrow Funds. Following such event,
any amount of the Working Capital Escrow Amount remaining in the
Escrow Account shall be released to the Sellers' Representative in
accordance with the terms of the Escrow Agreement, for further
distribution to the Sellers. In the event that the working capital
at Closing exceeds negative US$75,040, the Working Capital Escrow
Amount will be released from the Escrow Account to the Sellers'
Representative for further distribution to the Sellers, and the
Company shall pay to the Sellers an amount equal to the amount by
which the working capital at Closing exceeds negative
US$75,040.
The Sellers' Representative is entitled to reimbursement for
costs, and indemnified for losses, incurred while performing its
responsibilities under the Escrow Agreement. The Sellers'
Representative may recover its costs and losses by submitting a
claim against the Indemnity Escrow Account or the Working Capital
Escrow Account, and all amounts to be released to the Sellers from
such Account will be reduced by the amount of any such pending or
paid claim.
The Unvested MIU Amount will be released by the Escrow Agent to
the Company on the first anniversary of Closing for payment by the
Company to the employees entitled to their respective portions of
the Unvested MIU Amount in accordance with terms provided to such
employee effective upon the Closing.
4. Representations and Warranties
PVMG has made extensive representations and warranties to the
Company with respect to the PVMG and its subsidiaries. These
include representations and warranties relating to PVMG's and its
subsidiaries' organisation, good standing, capitalisation,
authority, due authorisation, financial statements, indebtedness,
accounts receivable, taxes, compliance with laws, title to
property, condition of assets, contracts, the absence of certain
adverse events, permits, no conflicts, consents, litigation,
absence of certain changes or events, employee benefit plans,
employment matters, environmental matters, intellectual property,
insurance, the absence of brokers or finders, bank accounts, books
and records, suppliers and product warranties. The representations
and warranties are subject to certain exceptions as set out in the
disclosure schedule attached to the Acquisition Agreement.
In addition, the Sellers have severally, but not jointly, made
certain representations and warranties to the Company, including
with respect to their title to the PVMG Shares, authority, due
authorisation and no litigation.
The Company is also making certain representations and
warranties to the Sellers, including in relation to corporate
organisation, good standing, authority, due authorisation and the
absence of brokers or finders.
5. Covenants
The Sellers have agreed that for the 5 years following Closing
they shall keep confidential all information concerning PVMG and
its subsidiaries, subject to certain exceptions, and that for the 3
year period following Closing they shall not solicit the employment
or engagement for services of any employees of, or contractors or
consultants to PVMG or its subsidiaries.
The Company and the Sellers have covenanted to the effect that
the Company shall make such tax filings as may be necessary
following Closing in respect of PVMG, and the Sellers shall
cooperate with the Company insofar as is necessary to allow the
Company to make such returns, and shall retain relevant books and
records for that purpose.
6. Warranty Claims and Claims under the Covenants
Each Seller has agreed, severally, but not jointly, to indemnify
and hold harmless the Company and its affiliates, and their
respective stockholders, members, managers, officers, directors,
employees, agents, successors and assigns (together, the "Buyer
Indemnitees") from and against all losses arising from any breach
of the representations, warranties or covenants given by the
Sellers. The representations and warranties are referred to in
paragraph 4 above. The covenants are summarised in paragraph 5
above.
In addition, each Seller has agreed, severally, but not jointly,
to indemnify and hold harmless the Buyer Indemnitees from and
against all losses caused by: (i) any breach of the warranties and
representations given by PVMG, which are referred to in paragraph 4
above; (ii) the failure to correctly calculate the MIU Payments,
Indebtedness, Unvested MIU Amount, and Specified Payments (in each
case, referred to in paragraph 2 above); (iii) claims arising from
certain pending litigation in which PVMG is involved, and which is
described in the disclosure schedule; (iv) claims from persons who
were officers, directors, employees or agents of PVMG or one of its
subsidiaries related to the right to indemnification for actions
taken or events which occurred prior to Closing, and (iv) any fees,
expenses or other payments incurred or owed by a Seller, PVMG or
and of its subsidiaries to any agent, broker or investment banker
etc. in connection with the transactions contemplated by the
Acquisition Agreement.
The liability of the Sellers described above is limited to the
amount of the Indemnity Escrow Funds, other than for claims for
losses arising out of a breach of certain key representations and
warranties (such as the warranty relating to the capitalisation of
PVMG) (the "Specified Representations") and breaches of the
covenants referred to in paragraph 5 above. In respect of the
Specified Representations and such covenants, the liability of a
Seller is limited to the amount of the Purchase Price actually
received by that Seller. In addition, the Acquisition Agreement
provides that the Sellers shall not be liable for losses arising
out of breach of representations, warranties or covenants (other
than the Specified Representations and breaches of the covenants
referred to in paragraph 5 above) unless the aggregate of such
losses exceeds US$50,000 (or US$360,000 in the case of the
representation regarding the absence of undisclosed
liabilities).
The Company has agreed to indemnify and hold harmless the
Sellers and their affiliates, and their respective stockholders,
members, managers, officers, directors, employees, agents,
successors and assigns (together, the "Seller Indemnitees") from
and against all losses arising from any breach of the
representations, warranties and covenants given by the Company,
which are referred to in paragraphs 4 and 5 above, and any losses
incurred by any Seller Indemnitee in connection with any contract
between the Company and PVMG (or its subsidiaries).
The representations and warranties referred to above will cease
to be of further force and effect on the Second Release Date. The
liabilities of the Sellers to the Buyer Indemnitees and the Company
to the Seller Indemnitees will fall away at that date, unless
notice of a claim has been given to the indemnifying party by the
indemnified party prior to the Second Release Date and such claim
is pending on the Second Release Date.
7. Governing Law
The Acquisition Agreement is governed by the laws of the State
of Delaware.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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