TIDMETO
RNS Number : 9654V
Entertainment One Ltd
11 April 2019
Date: 11 April 2019
On behalf of: Entertainment One Ltd.
(the "Company", "eOne", "Entertainment One" or the "Group")
Embargoed until: Immediate release
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS
RESTRICTED AND NOT FOR RELEASE, PUBLICATION, DISTRIBUTION OR
FORWARDING, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO
OR FROM THE UNITED STATES, AUSTRALIA, NEW ZEALAND, JAPAN, THE
REPUBLIC OF SOUTH AFRICA OR ANY PROVINCE OR TERRITORY OF CANADA OR
ANY JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION
IS UNLAWFUL. PLEASE SEE THE IMPORTANT NOTICE AT THE OF THIS
ANNOUNCEMENT.
Entertainment One Ltd. ("eOne" or the "Company")
Acquisition of Audio Network Limited
-- eOne to acquire 100% of UK-based Audio Network Limited
("Audio Network"), one of the world's largest independent creators
and publishers of original high-quality music for use in film,
television, advertising and digital media, with streamlined owned
rights (the "Acquisition")
-- The Acquisition enhances eOne's presence in music, a rapidly
growing sector, with attractive growth that is complementary to
eOne's music, film, television and family brands businesses
-- Audio Network has an attractive financial profile, including
revenue of GBP29m (growing 13% versus prior year), reported EBITDA
of GBP11m (reported EBITDA margin of 35%) and GBP10m profit before
tax, for the twelve-month period ended 30 June 2018 with total
gross assets of GBP18m as of 30 June 2018
-- Recurring and predictable cash flow from subscription revenue
and royalty collections support strong free cash flow conversion of
approximately 90% for the twelve-month period ended 30 June
2018
-- The combined business is expected to create scale, synergies
and revenue opportunities across eOne
-- Key management, including co-founder Andrew Sunnucks and CEO
Robb Smith, will join the senior management team of eOne's Music
business, led by Chris Taylor, and continue to drive execution of
Audio Network's strategy and day-to-day operations
-- Enterprise value of GBP165m on a cash-free and debt-free
basis, represents a multiple of 15x Audio Network's last 12 months'
reported EBITDA of GBP11m as of 30 June 2018
-- Aggregate consideration of GBP178m comprised of approximately
GBP165m acquisition of Audio Network and GBP13m acquisition of cash
and cash equivalents net of working capital items, interest, and
other transaction adjustments, acquired at completion which is
expected on or before 18 April 2019 ("Completion")
-- Cash consideration to be partially financed by the proceeds
of the placing announced by Company today (the "Placing") with the
remainder expected to be financed by a debt financing and the issue
of Common Shares in eOne to Key Management
-- Acquisition is targeted to be EPS accretive in the current
financial year ending 31 March 2020, including revenue
opportunities and cost synergies
-- Proforma leverage for the Acquisition is targeted at
approximately 1.9x as of 31 March 2019, reducing in subsequent
years
Introduction
eOne today announces that Entertainment One UK Holdings Ltd, a
wholly owned indirect subsidiary of the Company, has entered into a
share purchase agreement to acquire 100% of the shares of Audio
Network for an aggregate consideration of approximately GBP178m,
including cash and cash equivalents net of working capital items,
interest, and other transaction adjustments, acquired at
Completion, of approximately GBP13m.
The consideration will be satisfied by the payment of
approximately GBP169m in cash and by the issue of eOne common
shares (the "Subscription Shares") to key management shareholders
("Key Management") of Audio Network on Completion, equating to
approximately GBP9m.
Key Management is restricted from disposing of any of the
Subscription Shares for twelve months from the date of Completion
(the "Lock-In Period"). This lock-in undertaking is subject to
customary exceptions and a material reduction in share price. The
sale of any remaining Subscription Shares during the Lock-In Period
(under an exception) or for twelve months following the Lock-In
Period is subject to orderly market arrangements.
The total fundraise of approximately GBP191m will be used to
fund the aggregate consideration of GBP178m for the Acquisition,
Acquisition fees and expenses, provides balance sheet flexibility
for future bolt on acquisitions and general corporate purposes. The
fundraise will be financed by the proceeds of the Placing announced
today to raise approximately GBP130m before expenses, a GBP52m term
loan provided by JPMorgan Chase, N.A. and the issue of the
Subscription Shares equating to approximately GBP9m. The results of
the Placing are expected to be announced on 12 April 2019 and
shares allotted under the Placing are expected to be admitted on 16
April 2019. Pro forma leverage for the Acquisition is targeted at
approximately 1.9x as of 31 March 2019, reducing in subsequent
years.
The Acquisition is not conditional upon the completion of the
Placing or the debt financing. If the proceeds of the Placing are
received but the Acquisition does not complete, the directors of
the Company will consider, in the best interests of Shareholders as
a whole, whether to retain the proceeds of the Placing to be
utilised for other investment opportunities and/or for the
repayment of existing debt, or to return some or all of the
proceeds pro rata to Shareholders (including those who did not
participate in the Placing), in the most efficient manner from a
taxation perspective, in accordance with applicable law.
Background to the Acquisition and description of Audio
Network
Audio Network is a UK based independent creator and publisher of
original high quality music for use in film, television,
advertising and digital media, with streamlined owned rights. It
derives revenue from sync licensing, approximately 60% of which is
annual subscription based revenue, and publishing royalties,
generating highly recurring and predictable cash flow. Audio
Network is creatively led and data-informed, mixing human curation
and music supervision with automation to build search and discovery
capabilities. Its premium, diversified music catalogue of over
150,000 owned tracks and over 16 new album releases per month, is
monetised by its predictive data informed sales model and advanced
content management system. Audio Network also benefits from its
longstanding partnerships with more than 1,000 known and emerging
artists and renowned composers, and impressive roster of large
high-profile companies with over 30,000 customers across 130
countries. Audio Network has approximately 140 employees across 9
offices worldwide.
Strategic rationale
The Board believes that the Acquisition is in line with the
Company's strategy to create, own and control high quality content.
The Acquisition enhances eOne's presence in music, a fast-growing
sector with attractive growth that is complementary to eOne's
existing music, film and television businesses. The Acquisition
brings together two talent-focused organisations that share a
commitment to being artist-first and platform agnostic.
The combined business is expected to create scale, synergies and
revenue opportunities across eOne. With nine offices and teams
around the world, Audio Network brings longstanding partnerships
with more than 1,000 artists and composers to eOne to benefit from
the Group's record label services and extensive film, television
and brand capabilities. The integration of Audio Network further
generates sync placement opportunities for eOne's commercial
artists. Additional revenue opportunities including developing sync
and royalty streams through eOne's film, television and family
brands businesses.
Under the leadership of eOne's Global President of Music, Chris
Taylor, co-founder Andrew Sunnucks will continue in his role as
Chairman of Audio Network, and the existing executive management
team under CEO Robb Smith will remain in place.
Financial benefits
The Board believes that the Acquisition will be financially
beneficial to the Company and will add value for Shareholders
through:
-- strengthening the Company's growth, margin and free cash flow
profile by scaling eOne's Music business combined with Audio
Network to annual revenue exceeding GBP75m proforma as of 31 March
2018
-- generating additional revenue opportunities and cost
synergies through integration of Audio Network with eOne; and
-- Acquisition is targeted to be EPS accretive in the current
financial year end 31 March 2020, including revenue opportunities
and cost synergies
Commenting on the Acquisition, eOne's Group Chief Executive,
Darren Throop, said:
"As we continue to unlock the power and value of creativity for
artists, we are very pleased to welcome Audio Network, whose
passionate management team and ambition align with ours. The
combination of eOne's front-end commercial artist catalogue and
Audio Network's premium diversified music catalogue creates a
one-stop solution for business customers seeking high-quality
music"
Note to the editor
A team led by Rebecca Bothamley and Robert Hamill at Mayer Brown
LLP with support from Osler, Hoskin & Harcourt LLP provided
legal counsel on the transaction for eOne. J.P. Morgan Chase Bank,
N.A. provided financing for the transaction and Milbank LLP
provided legal counsel on the financing for eOne. Audio Network
Limited was advised by Jefferies International Limited on the
transaction with Taylor Wessing LLP providing legal counsel.
Presentation and dial-in details
A conference call to investors and analysts will be held at
17:30 BST on 11 April 2019. Dial-in access details for the call are
available from the Company. The slides accompanying the
presentation will be available at www.entertainmentone.com shortly
before the start of the presentation. A replay will be available
until 18 April 2019 at www.incommuk.com/customers/entertainmentone,
Access Code: 363578.
Contacts
Entertainment One Ltd.
Joseph Sparacio, Chief Financial
Officer
Patrick Yau, Head of Investor
Relations +44 (0) 20 3714 7931
J.P. Morgan Cazenove
Hugo Baring
Bill Hutchings
Ed Digby
Investec Bank plc
Patrick Robb +44 (0) 20 7742 4000
Sara Hale
Neil Coleman
+44 (0) 20 7597 5970
Canaccord
Sam Lucas
Ben Griffiths +44 (0) 20 7523 8000
Alma PR
Rebecca Sanders-Hewett +44 (0) 20 3405 0205
About eOne
Entertainment One Ltd. (LSE:ETO) is a global independent studio
that specialises in the development, acquisition, production,
financing, distribution and sales of entertainment content. The
Company's diversified expertise spans across film, television and
music production and sales; family programming, merchandising and
licensing; digital content; and live entertainment. Through its
global reach and expansive scale, powered by deep local market
knowledge, the Company delivers the best content to the world.
Entertainment One's robust network includes international
feature film distribution company Sierra/Affinity; Amblin Partners
with DreamWorks Studios, Participant Media, and Reliance
Entertainment; Makeready with Brad Weston; unscripted television
production companies Whizz Kid Entertainment and Renegade 83; live
entertainment leaders Round Room Entertainment; world-class music
labels Dualtone Music Group and Last Gang; and award-winning
emerging content and technology studio Secret Location.
IMPORTANT NOTICE:
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of MAR)
prior to its release as part of this announcement. The person
responsible for arranging release of this information on behalf of
eOne is Edward Parry.
In addition, market soundings (as defined in MAR) were taken in
respect of the Placing and the Acquisition 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 and the separate announcement in respect of the
Placing being made by the Company today. 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.
The release, publication or distribution of this announcement in
certain jurisdictions may be restricted by law and therefore
persons in such jurisdictions into which these materials are
released, published, distributed or forwarded should inform
themselves about and observe such restrictions. This announcement
is for information purposes only and is not intended to, and does
not form part of any invitation to purchase, subscribe for, or
otherwise acquire or dispose of, or any solicitation to purchase or
subscribe for or otherwise acquire or dispose of any securities in
any jurisdiction. The information contained herein is not for
release, publication, distribution or forwarding, directly or
indirectly, in or into the United States (including its territories
and possessions, any state of the United States and the District of
Columbia). Any failure to comply with any such restrictions may
constitute a violation of the securities laws of such jurisdiction.
This announcement does not contain or constitute an offer to sell
or the solicitation of an offer to purchase securities to any
person with a registered address in, or who is resident in,
Australia, New Zealand, Japan, the Republic of South Africa or in
any jurisdiction in which such an offer or solicitation is
unlawful. None of the securities referred to herein have been or
will be registered under the relevant laws of any state, province
or territory of Australia, New Zealand, Japan or the Republic of
South Africa. Subject to certain limited exceptions, none of these
materials will be released, published, distributed or forwarded in
or into Australia, New Zealand, Japan or the Republic of South
Africa.
This announcement does not contain or constitute an offer to
sell or the solicitation of an offer to purchase securities in any
province or territory of Canada. This announcement does not
constitute an "offering memorandum" within the meaning of the
securities laws of any province or territory of Canada.
This announcement does not contain or constitute an offer for
sale or the solicitation of an offer to purchase securities in the
United States. The securities referred to herein have not been and
will not be registered under the Securities Act or with any
securities regulatory authority of any state or jurisdiction of the
United States, and may not be offered or sold in the United States
absent registration under the Securities Act or an available
exemption from, or transaction not subject to, the registration
requirements of the Securities Act. There will be no public offer
of any securities in the United States. None of the Placing Shares,
the Subscription Shares, this announcement or any other document
connected with the Acquisition or the Placing has been or will be
approved or disapproved by the United States Securities and
Exchange Commission or by the securities commissions of any state
or other jurisdiction of the United States or any other regulatory
authority, and none of the foregoing authorities or any securities
commission has passed upon or endorsed the merits of the offering
of the Placing Shares or the Subscription Shares or the accuracy or
adequacy of this announcement or any other document connected with
the Acquisition or the Placing. Any representation to the contrary
is a criminal offence in the United States.
J.P. Morgan Securities plc (which operates its investment
banking activities in the United Kingdom as J.P. Morgan Cazenove)
("J.P. Morgan Cazenove") and Investec Bank plc ("Investec")
(together, the "Bookrunners") are each authorised by the PRA and
regulated in the United Kingdom by the PRA and the FCA. Canaccord
Genuity Limited ("Canaccord", and together with the Bookrunners,
the "Banks") is regulated in the United Kingdom by the FCA.
Each of the Banks is acting exclusively for the Company and no
one else in connection with the Placing and, in the case of J.P.
Morgan Cazenove, as sponsor in connection with the Acquisition, and
will not regard any other person (whether or not a recipient of
this announcement) as a client in relation to the Placing and will
not be responsible to anyone other than the Company for providing
the protections afforded to their respective clients or for
providing advice in relation to the Placing, the Acquisition or any
matters, transactions or arrangements referred to in this
announcement. Apart from the responsibilities and liabilities, if
any, which may be imposed on the Banks by FSMA or the regulatory
regime established thereunder, none of the Banks accepts any
responsibility whatsoever or makes any representation or warranty,
express or implied, for the contents of this announcement including
its accuracy, completeness or verification or for any statement
made or purported to be made by it, or on its behalf, in connection
with the Company, the Placing Shares, the Subscription Shares, the
Acquisition or the Placing and nothing in this announcement shall
be read as a promise or representation in this respect whether as
to the past or future. The Banks accordingly disclaim all and any
liability whatsoever arising in tort, contract or otherwise (save
as referred to above) which they might otherwise have in respect of
this announcement or any such statement.
Jefferies International Limited ("Jefferies"), which is
authorised and regulated in the United Kingdom by the Financial
Conduct Authority, is acting for Audio Network Limited and no one
else in connection with the matters set out in this announcement.
In connection with such matters, Jefferies will not regard any
other person as their client, nor and will not be responsible to
anyone other person than Audio Network Limited for providing the
protections afforded to clients of Jefferies or for providing
advice in relation to the contents of this announcement or any
other matter referred to herein. Neither Jefferies nor any of its
subsidiaries, affiliates or branches owes or accepts any duty,
liability or responsibility whatsoever (whether direct, indirect,
consequential, whether in contract, in tort, under statute or
otherwise) to any person who is not a client of Jefferies in
connection with this announcement, any statement contained herein
or otherwise.
This announcement has been issued by, and is the sole
responsibility of eOne. The information contained in this
announcement is for background purposes only and does not purport
to be full or complete. No reliance may or should be placed by any
person for any purpose whatsoever on the information contained in
this announcement or on its accuracy or completeness. The
information in this announcement is subject to change.
Recipients of this announcement should conduct their own
investigation, evaluation and analysis of the business, data and
property described in this announcement. This announcement does not
constitute a recommendation concerning any investor's options with
respect to any matters disclosed herein. The price and value of
securities can go down as well as up. Past performance is not a
guide to future performance. The contents of this announcement are
not to be construed as legal, business, financial or tax advice.
Each shareholder or prospective investor should consult with his or
her or its own legal adviser, business adviser, financial adviser
or tax adviser for legal, financial, business or tax advice.
Neither the contents of eOne's website nor any website
accessible by hyperlinks on eOne's website is incorporated in, or
forms part of, this announcement.
This announcement contains "forward-looking statements" which
includes all statements other than statements of historical fact,
including, without limitation, those regarding the Company's
financial position, business strategy, plans and objectives of
management for future operations, or any statements preceded by,
followed by or that include the words "targets", "believes",
"expects", "aims", "intends", "will", "may", "anticipates",
"would", "could" or similar expressions or negatives thereof. Such
forward-looking statements involve known and unknown risks,
uncertainties and other important factors beyond the Company's
control that could cause the actual results, performance or
achievements of the Company to be materially different from future
results, performance or achievements expressed or implied by such
forward-looking statements. Such forward-looking statements are
based on numerous assumptions regarding the Company's present and
future business strategies and the environment in which the Company
will operate in the future. These forward-looking statements speak
only as at the date of this announcement. None of the Company, J.P.
Morgan Cazenove and Investec, or their respective directors,
officers, employees, agents, affiliates and advisers, or any other
party undertakes or is under any duty to update this announcement
or to correct any inaccuracies in any such information which may
become apparent or to provide you with any additional information,
other than any requirements that the Company may have under
applicable law or the Listing Rules, the Prospectus Rules, the
Disclosure Guidance and Transparency Rules or MAR. To the fullest
extent permissible by law, such persons disclaim all and any
responsibility or liability, whether arising in tort, contract or
otherwise, which they might otherwise have in respect of this
announcement. The information in this announcement is subject to
change without notice.
DEFINITIONS AND INTERPRETATION
"Acquisition Agreement" the agreement entered into by Entertainment
One UK Holdings Ltd, a wholly owned
indirect subsidiary of the Company,
and Audio Network Limited dated [11]
April 2019 in connection with the Acquisition
"Banks" The Bookrunners and Canaccord
"Board" the board of directors of the Company
from time to time
"Bookrunners" J.P. Morgan Cazenove and Investec
"Canaccord" Canaccord Genuity Limited
"Common Shares" common shares of no par value in the
capital of the Company
"Completion" completion of the Acquisition in accordance
with the terms of the Acquisition Agreement
"Company" or "eOne" Entertainment One Ltd., a corporation
incorporated under the laws of Canada
"EBITDA" operating profit or loss excluding
amortisation of acquired intangibles;
depreciation; amortisation of software;
share-based payment charge; tax; finance
costs and depreciation relate to joint
ventures; and operating one-off items
"FCA" the Financial Conduct Authority of
the United Kingdom
"FSMA" Financial Services and Markets Act
2000, as amended
"Group" the Company and its subsidiaries and
subsidiary undertakings from time to
time and, for certainty, including
Entertainment One Canada Ltd. and its
subsidiaries and subsidiary undertakings
"Investec" Investec Bank plc
"J.P. Morgan Cazenove" J.P. Morgan Securities plc (which carries
on its UK investment banking activities
as J.P. Morgan Cazenove)
"Listing Rules" the listing rules and regulations made
by the FCA under s73A of FSMA, as amended
from time to time
"London Stock Exchange" London Stock Exchange plc
"MAR" Regulation (EU) No 596/2014
"Official List" the Official List of the FCA
"Placing" the placing of new Common Shares announced
by the Company on the date of this
announcement
"Placing Shares" the new Common Shares to be issued
by the Company pursuant to the Placing
and "Placing Share" shall be construed
accordingly
"PRA" the Prudential Regulation Authority
of the United Kingdom
"Prospectus Rules" the prospectus rules made by the FCA
under s73A FSMA
"Securities Act" the United States Securities Act of
1933, as amended
"Shareholders" holders of Common Shares, each individually
being a "Shareholder"
"Sterling" or "GBP" the lawful currency of the United Kingdom
"UK" or "United the United Kingdom of Great Britain
Kingdom" and Northern Ireland
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ACQSFIFMFFUSESL
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