TIDMZIN
RNS Number : 5520U
Zinc Media Group PLC
25 October 2017
Zinc Media Group plc
("Zinc Media" or the "Company")
Proposed Acquisition of Tern Television Productions Limited and
proposed Placing of 389,603,280 new Ordinary Shares at 0.9p per new
Ordinary Share to raise GBP3.5 million
Zinc Media Group plc, (AIM: ZIN), the TV and multimedia content
producer, is pleased to announce the acquisition of Tern Television
Productions Limited ("Tern"), for a total consideration of up to
GBP5.45 million and an oversubscribed placing of 389,603,280 new
Ordinary Shares in the Company (the "Placing Shares") at a price of
0.9 pence per share (the "Placing Price") to raise GBP3.5 million
(before expenses) (the "Placing").
Highlights
-- the acquisition of Tern, a profitable independent TV
production company, for a total consideration of up to GBP5.45
million (comprising initial consideration of GBP2 million, plus
GBP1.1 million for surplus cash and earnout consideration of up to
GBP2.35 million) to be paid partly in shares and partly in cash
-- An oversubscribed placing to raise approximately GBP3.5
million at a price of 0.9 pence per share
-- In the financial year ended 31 March 2017, Tern's turnover
was approximately GBP5.3m with profit before tax of approximately
GBP0.3m
Peter Bertram, Chairman, said:
"We are delighted to announce this key acquisition for Zinc
Media and are delighted to welcome the highly regarded Tern
Television team into the Company. We believe this acquisition will
place us in a strong position to further expand and grow in an
industry which is experiencing ever-increasing demand for original
content, due to the rapid growth of connected devices and new TV
platforms.
"By augmenting our business through acquisitions such as that of
Tern, the enlarged group will have greater abilities to reach new
markets, to establish strategic relationships with broadcasters and
international commissioners and to produce innovative content.
"At Zinc Media, we continue to remain focused on operating a
high-quality and respected business, maximising shareholder value.
I look forward to updating the market on the completion of this
acquisition in due course."
The Acquisition
Tern, established in 1988, is a successful profitable
independent TV production company specialising in factual TV
production. The company has key production bases in Scotland and
Northern Ireland and typically produces over sixty hours of TV
annually for UK broadcasters, including the BBC, Channel 4 and Sky
1, as well as international broadcasters such as Discovery, PBS and
National Geographic Channels. It has won numerous awards including
BAFTAs, Prix Italia, Royal Television Society awards and a Cine
Golden Eagle. Tern has a profitable track record and reported an
increased turnover of approximately GBP5.3m in the financial year
ended 31 March 2017, up from approximately GBP4.4m in the year
ended 31 March 2016.
This Acquisition is another pivotal step in Zinc Media's buy and
build strategy as it looks to satisfy the high demand for content,
and to consolidate the fragmented independent TV production
industry by targeting attractive and profitable companies in the UK
and internationally.
Strategic Rationale
The Board believes that the Acquisition has a compelling
strategic and financial rationale, as it:
-- provides an opportunity for the Company to expand its
position as a TV production business of scale by being a
consolidator within the industry, meeting the increased demand for
high quality on-demand TV content
-- will broaden and enhance the Company's creative capabilities,
as Tern has experience and produces content in factual niches that
the Company is not currently active in
-- is a leading dual nation TV producer, and Zinc Media will
benefit from being able to produce major productions, specifically
in these nations, where there are strong indications of future
growth and interest by the major UK broadcasters
-- brings with it a high-quality and reputable management team,
all of whom intend to stay with the Company following the
completion of the Acquisition, and who will enhance the overall
operations and management of Zinc Media
Transaction and Placing highlights
-- The Acquisition is for total consideration of up to GBP5.45
million, comprising initial consideration of GBP2 million, of which
GBP0.75 million is to be satisfied by the issue of the
Consideration Shares, plus GBP1.1 million for surplus cash and
earnout consideration of up to GBP2.35 million. Of the earnout
consideration, up to 50 per cent may be satisfied by the issue of
additional Ordinary Shares, at the Company's option.
-- The Placing will raise gross proceeds for the Company of GBP3.5 million.
-- Several of the Board are participating in the Placing.
-- The proceeds of the Placing are proposed to be used principally to finance the initial cash consideration due in respect of the Acquisition and to provide additional growth capital for the enlarged business.
-- The Placing is conditional on, inter alia, the passing of the
Resolutions to be proposed at a General Meeting expected to be held
at the offices of CMS Cameron McKenna Nabarro Olswang LLP, Cannon
Place, 78 Cannon Street, London EC4N 6AF at 9.00 am on 13 November
2017. A circular which will provide further details of the Placing
and include a notice convening the General Meeting (the "Circular")
is expected to be sent to Shareholders and be available on the
Company's website in the coming few days.
Terms used but not defined in this announcement shall have the
meanings given to such terms in the Circular. This announcement
contains inside information for the purposes of Article 7 of EU
Regulation 596/2014 ("MAR"). In addition, market soundings (as
defined in MAR) were taken in respect of the Placing with the
result that certain persons became aware of inside information (as
defined in MAR), as permitted by MAR. This inside information is
set out in this Announcement. Therefore, those persons that
received inside information in a market sounding are no longer in
possession of such inside information relating to the Company and
its securities.
Enquiries:
+44 (0) 20 7878
Zinc Media Group plc 2311
Peter Bertram, Chairman
David Galan, Chief Operating
and Financial Officer
www.zincmedia.com
N+1 Singer (NOMAD and Broker +44 (0) 20 7496
to Zinc Media Group plc) 3000
Shaun Dobson / Lauren Kettle
(Corporate Finance)
Michael Taylor (Corporate Broking)
Peterhouse Corporate Finance +44 (0) 20 7469
Limited (Joint Broker) 0932
Martin Lampshire / Duncan Vasey
/ Eran Zucker
Yellow Jersey +44 (0) 7825 916715
Felicity Winkles / Georgia Colkin
/ Katie Bairsto
EXPECTED TIMETABLE
Last date and time for receipt 9.00 a.m. on 9 November
of Proxy Forms for the General 2017
Meeting
General Meeting 9.00 a.m. on 13 November
2017
Admission of New Ordinary 8.00 a.m. on 14 November
Shares to trading on AIM 2017
PLACING STATISTICS
Placing Price 0.9 pence
Ordinary Shares currently in
issue 619,775,478
New Ordinary Shares to be issued
pursuant to the Acquisition (approximate)
(1) 65,217,392
New Ordinary Shares to be issued
pursuant to the Placing 389,603,280
New Ordinary Shares to be issued
pursuant to the Preference Share
Conversion (approximate) (2) 254,912,269
Enlarged Share Capital (approximate) 1,329,508,419
Percentage of Enlarged Share
Capital represented by the New
Ordinary Shares (approximate) 53.38
Gross proceeds of the Placing GBP3.5 million
at the Placing Price
Net Proceeds of the Placing (approximate) GBP3.15 million
1) The new Ordinary Shares to be issued pursuant to the
Acquisition will be issued at the average of the Closing Price over
the five dealing days prior to the date of the General Meeting (and
any adjournment thereof). Based on the Closing Price as at the last
practicable date prior to publication of this announcement the
number of new Ordinary Shares to be issued pursuant to the
Acquisition would be 65,217,392.
2) The new Ordinary Shares to be issued pursuant to the
Preference Share Conversion will only be known once the issue price
for the Consideration Shares is known (calculated in accordance
with the terms of the Principal SPA and noted above in paragraph
1). The number of Preference Shares converted will be determined to
ensure that the combined current holding of Ordinary Shares of
Herald and John Booth Parties is maintained at approximately 40 per
cent. of the Enlarged Share Capital.
An announcement confirming the number of new Ordinary Shares to
be issued pursuant to the Acquisition and the Preference Share
Conversion, and the resultant Enlarged Share Capital, will be
released by the Company following conclusion of the General Meeting
and prior to Admission.
Introduction
The Company has entered into a conditional sale and purchase
agreement to acquire Tern, a leading regional television production
company with production bases in Scotland and Northern Ireland, for
total consideration of up to GBP5.45 million and has placed
389,603,280 new Ordinary Shares at 0.9 pence per share with certain
of the Company's shareholders and new investors. The Placing will
raise gross proceeds for the Company of GBP3.5 million.
The consideration for the Acquisition comprises an initial
consideration of GBP2.35 million in cash (which comprises GBP1.25
million plus GBP1.1 million for the surplus cash remaining in Tern)
and GBP0.75 million satisfied by the issue of the Consideration
Shares and earnout consideration of up to GBP2.35 million. The
proceeds of the Placing are proposed to be used principally to
finance the initial cash consideration due in respect of the
Acquisition and provide additional growth capital for the enlarged
business.
The issue of the Placing Shares is conditional, inter alia, upon
the approval by Shareholders of the Resolutions to be proposed at
the General Meeting of the Company convened for 13 November 2017.
Subject to Shareholders approving the Resolutions to be proposed at
the General Meeting, it is expected that Admission of the New
Ordinary Shares will take place on or about 14 November 2017.
The Placing Shares are not being offered on a pro rata basis to
existing Shareholders and accordingly the Placing is conditional,
inter alia, upon Shareholders resolving to disapply statutory
pre-emption rights. Shareholders will find set out at the end of
this document a Notice of General Meeting which has been convened
for 9.00 a.m. on 13 November 2017 at which resolutions will be
proposed to approve the allotment and issue of the Placing Shares
and to dis-apply statutory pre-emption rights in respect of such
allotment.
In conjunction with the Placing, Herald and John Booth Parties
will convert such number of Preference Shares and accrued dividends
on the Preference Shares into Ordinary Shares such that the
combined current holding of Ordinary Shares of approximately 40 per
cent. of the issued ordinary share capital in the Company is
maintained.
Background to and reasons for the ACQUISITION AND Placing
Major media and platform owners are experiencing significant
growth in demand for high quality on-demand TV content to satisfy
consumer demand and 'binge viewing', driven by the rapid growth in
connected devices and new TV platforms such as Netflix and Amazon.
To satisfy the high demand for content, the Board believes that the
independent TV industry is likely to consolidate, with many small
independent TV production companies being acquired as larger
entities seek to expand their breadth of original content. The
Board believes that there is a window of opportunity for the Group
to grow a TV production business of scale by being a consolidator
within the industry, and it has begun this buy-and-build strategy
in the past through the acquisition of Reef Television Limited in
2015. In the Indie Survey 2017 - Broadcast sponsored by Barclays
Zinc was ranked sixth in the Top UK Owners/ Consolidators league
table.
Background to the Group
The Company is a TV and multimedia content producer and is one
of the UK's leading independent TV production companies,
specialising in non-scripted factual programming. The Group is
known and recognised for being a leader in the production of
factual television content, spanning heavily formatted daytime TV
series to single high production value landmark documentaries,
supplying its content to the majority of broadcasters in the UK and
now also to certain key international broadcasters.
On 26 September 2017, the Group reported a return to
profitability for the first time in several years in respect of the
year to 30 June 2017, following a period of restructuring, leaving
the Group with a new strategy, a rejuvenated business model and a
significantly simplified product offering. The Group is now
targeting further revenue growth through both organic means and
carefully selected acquisitions.
Acquisitions Strategy
Acquisitions provide a clear opportunity for the Group to expand
its position as a major independent TV production company. The
Directors believe that being a larger TV group will provide the
opportunity to capitalise on the more lucrative international
marketplace as the Group will have more creative breadth, produce
content in a wider range of factual TV genres, and have more
production resource and increased relationships with international
commissioners and broadcasters. The independent television
production market is consolidating as there is a drive towards
scale, in an industry which is dependent upon a relatively small
but growing number of customers / broadcasters. The Directors
believe it is in the best interests of the Group to act as a driver
of consolidation at this time, in order to maximise shareholder
value in the medium term.
Organic Growth Strategy
The organic growth strategy is to grow by producing higher
revenue programmes: this means focussing on securing larger budgets
for higher quality productions and longer running series, which
have the capacity to deliver strong royalties through international
distribution. The Group aims to grow organically, through focussing
more on the Group's relationships with international broadcasters
who are able to commission or co-produce higher value series and
through recruiting more executive talent to push new ideas and
expand our traditional content boundaries into new factual genres
and formats. This organic growth strategy was evident in the last
financial year, which saw key senior management hires in the TV
division, notably Roy Ackerman as Director of International and
Managing Director of Films of Record and Emma Hindley as Creative
Director of Brook Lapping.
Information on Tern
Tern, established in 1988, is a successful independent TV
production company, specialising in factual production, currently
employing 20 staff, based in Scotland and Northern Ireland.
Televisual Media's 2017 annual TV industry survey showed Tern at
No 29 in the Top True Independents league table and at No 7 in the
Genre Ratings: Specialist Factual list whilst Broadcast's 2017
survey showed Tern at No 14 in the Regional Indies. The company is
building a strong reputation for programming in two distinct
genres: Documentary & Specialist Factual and Popular Factual
& Formats.
Typically, Tern will produce over 60 hours of TV annually for
broadcasters including BBC One, BBC Two, BBC Four, BBC Scotland,
BBC Northern Ireland, Channel 4, Sky 1, Discovery, PBS and National
Geographic Channels. Awards include BAFTAs, Prix Italia, Royal
Television Society awards and a Cine Golden Eagle.
For the financial year to 31 March 2017 Tern generated audited
sales of GBP5.34 million and GBP0.30 million of profit before tax.
Total assets (audited) of Tern amounted to GBP3.01 million as at 31
March 2017. Based upon both Zinc's management and Tern's management
expectations, the Board expects the Acquisition to be earnings
enhancing in the current financial year.
Rationale for the Acquisition
The Board believes that the Acquisition will broaden and enhance
the Group's creative capabilities. Tern has experience and produces
content in factual niches that the Group is not currently active
in, in genres such as adventure, gardening and religious
programming.
The Board has noted the growing trend by the major UK
broadcasters to require production to be based outside London. The
Board believes that by having a leading Nations TV producer (being
the term often used to describe producers based in Scotland,
Northern Ireland or Wales) such as Tern within the Group, Zinc will
benefit by being able to produce major productions specifically in
the nations and regions, where there are strong indications of
future growth. In February 2017, the BBC announced that it had
reviewed its programming and services in the nations and, as a
result of this, it will be making significant changes and major
investments there including the biggest single investment in
broadcast content in Scotland in over twenty years. The BBC intends
to invest GBP20 million in a new TV channel to be broadcast from
Autumn 2018 - BBC Scotland - and intends to invest a further GBP20
million in increased network production from Scotland. In September
2017, the Culture Secretary also confirmed plans for significant
moves out of London for Channel 4, whilst Ofcom has announced a
review of the definitions of regional production.
The Board believes that Tern has a high quality and reputable
management team, all of whom intend to stay with the Group
following completion of the Acquisition, that will enhance the
overall operations and management of the Group.
Current Trading and Prospects
The Company released its preliminary results for the period
ended 30 June 2017 on 26 September 2017, in which it reported that
the level of activity in the TV division was higher than in
previous years at this stage in the financial year, with the
current TV commissioned order book at GBP8.00m, circa. 35 per cent.
of budgeted TV revenues for the year.
The level of commissioned programmes, the strong development
slate and multiple programme ideas at an advanced stage with
commissioners give management confidence in the outlook for the
full year, with significantly increased profits expected in FY18.
The Group's focus over the coming months will be to ensure that
there is a spread of production work across the different TV
divisions. The Board's overriding aim is to secure bigger budget,
long-running series and formats, but at the same time, mindful of
ensuring that there is also a mix of fast turnaround 'one-offs'
that can drive smaller short term revenues and help to smooth out
the peaks and troughs of the sales process in winning the bigger
budget commissions.
The Digital and Publishing divisions continue to trade in line
with management expectations.
The Placing
The Company is proposing to raise approximately GBP3.5 million
before expenses by the issue of the Placing Shares at 0.9p per new
Ordinary Share with certain existing Shareholders and new
investors. The Placing Shares represent 62.86 per cent. of the
existing issued share capital of the Company and will when issued
rank pari passu with the existing Ordinary Shares in the
Company.
Institutional and other investors have conditionally agreed to
subscribe for the Placing Shares at the Placing Price. The Placing
has not been underwritten. The issue of the Placing Shares is
conditional, inter alia, upon the approval by Shareholders of the
Resolutions to be sought at the General Meeting convened for 13
November 2017 and upon Admission becoming effective on 14 November
2017 (or such later date as the Company and the Joint Brokers may
agree but not later than 30 November 2017).
On 24 October 2017, the Company, N+1 Singer and Peterhouse
entered into the Placing Agreement pursuant to which the Joint
Brokers agreed, subject to certain conditions, to procure
subscribers for the Placing Shares at the Placing Price. The
Placing Agreement contains provisions entitling the Joint Brokers
to terminate the Placing (and the arrangements associated with it),
at any time prior to Admission in certain circumstances. If this
right is exercised, the Placing will lapse, any monies received in
respect of the Placing will be returned to the applicants without
interest and Admission will not occur.
The Company has agreed to pay N+1 Singer and Peterhouse upon
Admission a placing commission and all other costs and expenses of,
or in connection with, the Placing, plus any VAT thereon.
The Directors believe that raising new funds by way of the
Placing is the most appropriate method of funding the Company at
the present time. The Board considers that a general offer to
existing Shareholders by way of rights or other pre-emptive issue
is not appropriate at this stage of the Company's development due
to the significant additional costs that would be incurred and the
delay that would be caused by the production and approval of a
prospectus.
Use of ProceEDS
The net proceeds of the Placing will be used by the Company
principally to finance the initial cash consideration due in
respect of the Acquisition, together with associated transaction
costs and to provide additional growth capital for the enlarged
business.
PREFERENCE SHARES
In conjunction with the Placing, Herald and John Booth Parties
will convert such number of Preference Shares and accrued dividends
on the Preference Shares into Ordinary Shares such that their
combined current holding of Ordinary Shares of approximately 40 per
cent. of the issued Ordinary Share capital is maintained.
The exact number of Preference Shares to be converted will only
be known once the issue price for the Consideration Shares is known
(to be determined in accordance with the terms of the Principal
SPA) as that will determine the Enlarged Share Capital. If the
Consideration Shares were issued at 1.15 pence (this share price
being shown for illustrative purposes only) this would equate to a
conversion of approximately GBP2.0 million of preference share
capital.
In addition GBP303,374 of accrued dividend on the Preference
Shares is being converted into new Ordinary Shares at the Placing
Price. If the Consideration Shares were issued at 1.15 pence
(again, this share price being shown for illustrative purposes
only) the conversion of the Preference Shares plus the accrued
dividend on the Preference Shares would convert into 254,912,269
new Ordinary Shares.
Sale and purchase agreement
On 24 October 2017, the Company entered into a principal share
purchase agreement ("Principal SPA"), and option share purchase
agreements ("Option SPAs"), pursuant to which the Company agreed,
conditionally, to purchase the entire issued (and to-be issued)
share capital of Tern from its shareholders. The initial
consideration payable is GBP2,350,000 million in cash, and the
allotment of Ordinary Shares having an aggregate value of
GBP750,000, which consideration is to be satisfied on completion of
the Acquisition. Additional consideration may be payable also under
the Principal SPA to certain of the sellers, pursuant to the terms
of an agreed earn-out over the next three financial years, up to a
maximum amount of GBP2,350,000 (of which up to 50 per cent. of that
amount may be satisfied by the issue of additional Ordinary
Shares). Completion of the Acquisition Agreements is expected to
occur, subject to satisfaction of the conditions, on the day
immediately following Admission.
The Acquisition is conditional on (i) the approval of
Shareholders of the Resolutions and (ii) the Placing Agreement
becoming unconditional in accordance with its terms (save for any
condition relating to the Acquisition Agreements becoming
unconditional).
The Principal SPA contains certain customary warranties and a
tax covenant given by all the sellers in relation to Tern and its
business, subject to certain customary limitations. The Option SPAs
contain certain customary title and capacity warranties given by
those selling counterparties.
The Acquisition is capable of termination by (i) either party if
completion of the Acquisition has not occurred by 22 December 2017,
or (ii) by the Company prior to completion of the Acquisition if it
becomes aware of a material breach of warranties and
undertakings.
Related Party TransactionS
The following Shareholder holding, as at the date of this
announcement, directly or indirectly 10 per cent. or more of the
Existing Ordinary Shares is participating in the Placing at the
Placing Price:
At the date of Immediately following
this document Admission
Number Percentage Number Percentage
of Ordinary of issued of Ordinary of Enlarged
Shares share capital Shares Share Capital
held held
Artemis Alpha
Trust plc 80,000,000 12.91 117,211,780 8.82*
* This percentage being an approximation and subject to final
confirmation of the Enlarged Share Capital, once the price at which
the Consideration Shares are to be issued is confirmed.
The participation in the Placing by Artemis Alpha Trust plc
constitutes a related party transaction for the purposes of the AIM
Rules. The Directors consider, having consulted with the Company's
nominated adviser, N+1 Singer, that the terms of the Placing with
Artemis Alpha Trust plc are fair and reasonable insofar as the
Shareholders are concerned.
The Preference Share Conversion by Herald and the John Booth
Parties constitutes a related party transaction for the purposes of
the AIM Rules. The Directors consider, having consulted with the
Company's nominated adviser, N+1 Singer, that the terms of the
Preference Share Conversion are fair and reasonable insofar as the
Shareholders are concerned.
Notes to Editors
Zinc Media Group plc
Zinc Media Group plc is a leading British based producer of
high-quality television programmes and multimedia communications
content. The Group operates three divisions: television production;
digital communications and publishing.
The core television production division comprises four award
winning and critically acclaimed television production companies
Blakeway, Brook Lapping, Films of Record and Reef Television whose
brands produce television and radio programmes for both UK and
international broadcasters.
The communications division specialises in creating
communications strategies and behaviour change programmes,
campaigns and resources for corporates, charities and government
departments. This division runs a contract for Transport for
London.
The publishing division publishes homeowner-planning guidelines
for local authorities across the UK and sells trader advertising in
those guidelines.
For further information on Zinc Media please visit:
http://www.zincmedia.com/
Tern
Tern, established in 1988, is a successful independent TV
production company currently employing 20 staff, based outside
London. Specialising in factual production, Tern is a dual nation
independent company with key production bases in Scotland and
Northern Ireland.
Televisual Media's 2017 annual TV industry survey showed Tern at
No 29 in the Top True Independents league table and at No 7 in the
Genre Ratings: Specialist Factual list whilst Broadcast's 2017
survey showed Tern at No 14 in the Regional Indies. The company is
building a strong reputation for programming in two distinct
genres; Documentary & Specialist Factual and Popular Factual
& Formats.
Typically, Tern will produce over 60 hours of TV annually for
broadcasters including BBC One, BBC Two, BBC Four, BBC Scotland,
BBC Northern Ireland, Channel 4, Sky 1, Discovery, PBS and National
Geographic Channels. Awards include BAFTAs, Prix Italia, Royal
Television Society awards and a Cine Golden Eagle.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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