TIDMIGR
RNS Number : 9474Y
IG Design Group PLC
28 August 2018
The information contained within this announcement (the
"Announcement") is deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU)
No. 596/2014. Upon the publication of this Announcement via
Regulatory Information Service ("RIS"), this inside information is
now considered to be in the public domain.
IG Design Group plc
("Design Group", the "Company" or the "Group")
Acquisition of Impact Innovations, Inc.
Placing of new Ordinary Shares to raise GBP50 million
Notice of General Meeting
Trading Update
IG Design Group plc, a leading designer, innovator and
manufacturer of celebration, gifting, stationery and creative play
products, is pleased to announce that its wholly-owned subsidiary,
IG Design Group Americas, Inc. ("IG America") has entered into a
conditional agreement to acquire 100 percent of the equity interest
in Impact Innovations, Inc. ("Impact Innovations"), a leading
supplier of gift packaging and seasonal décor products in the US,
for total consideration of GBP56.5 million on a cash and debt free
basis (the "Acquisition") representing a 4.9x Underlying EBITDA
multiple with an additional working capital and other
adjustment.
In conjunction with the Acquisition, the Company is pleased to
announce a placing with institutional investors to raise up to
GBP50 million before expenses (the "Placing") through the issuance
of up to 9,804,000 new ordinary shares of 5 pence each in the
capital of the Company ("Placing Shares") at 510 pence ("Placing
Price") per Placing Share. The Placing was significantly
oversubscribed, with strong support from both new and existing
institutional shareholders, and the Placing Price represents a
discount of 0.06 percent to the volume weighted average price of
510.3 pence for the five days ended 24 August 2018.
Of the total value of the Placing, approximately GBP31.9 million
shall be used to satisfy the funding requirements in relation to
the Acquisition and is not subject to shareholder approval.
Accordingly, application has been made for 6,260,000 new ordinary
shares of 5 pence each in the capital of the Company ("First
Tranche Placing Shares") to be admitted to trading on AIM, and it
is expected that admission will occur at 8.00 a.m. on 29 August
2018. The issuance of the remaining 3,544,000 Placing Shares
("Second Tranche Placing Shares") is subject to shareholder
approval at the General Meeting, and it is expected that admission
will occur on 19 September 2018.
Completion of the Acquisition is conditional on the successful
admission of the First Tranche Placing Shares and is expected to
occur on or around 31 August 2018. The circular in respect of the
Second Tranche Placing Shares is expected to be posted to
shareholders on 29 August 2018.
Acquisition Highlights
For the year ended 31 December 2017, Impact Innovations recorded
Underlying EBITDA* of US$15.0 million on revenues of US$155.9
million and the directors of Design Group (the "Directors") believe
that the Acquisition will:
o Create the world's largest consumer Gift Packaging
business;
o Deliver significant earnings accretion in each of the next
three financial years;
o Deliver annual synergies in excess of US$5.0 million by year
three;
o Enable expansion into the growing and adjacent seasonal décor
product category both in North America and in established Design
Group markets around the world;
o Adds a complementary yet distinct customer base, and long-term
relationships with major blue chip US retailers;
o Establish further scale within the USA to create a world class
gift packaging manufacturing capability, leveraging established
Group know-how; and
o Deliver enhanced "one stop shop" product and service solutions
for customers.
*earnings before interest, tax, depreciation, amortisation,
excluding costs relating to Impact Innovations' historical employee
stock ownership plan and other one-off costs.
It is expected that the enlarged Group's average leverage post
the Acquisition and the Placing for the year ended 31 March 2019
will be 1.3x Underlying EBITDA.
Trading Update FY19
Design Group is also pleased to confirm that trading in the
current financial year to date has been strong and that the Group's
full year financial forecast remains in line with management
expectations.
Paul Fineman, Chief Executive Officer of Design Group,
commented:
"The combination of Impact Innovations with Design Group not
only doubles the scale of our business in the Americas, it further
enhances the overall performance and growth potential of our whole
Group whilst continuing to illustrate our delivery of the Group's
stated strategy.
"We are delighted to be acquiring a business that has a strong
track record of consistent robust financial performance and cash
generation through providing great product and category management
expertise to its customers. As a combined Group, we have a
significant opportunity to capitalise on our now enlarged scale and
breadth of offering to our customer base of many of the world's
largest and most successful retailers.
"Together, we will enhance our scope for future development,
both organically and through carefully considered acquisitions,
building on the strong foundations that have been laid and taking
Design Group to its next exciting level of growth."
John Dammermann, Chief Executive Officer of Impact Innovations,
commented:
"I, along with our team at Impact Innovations am very excited to
be joining Design Group, a business with an impressive track record
and great momentum. Together we have even greater opportunity for
future growth and I look forward to continuing to play a key role
in delivering ongoing success within the Americas and throughout
the overall Group."
Management will be hosting an analyst call at 08:30 this
morning. To register please contact designgroup@almapr.co.uk. A
video overview from CEO Paul Fineman is available to watch here:
https://drive.google.com/open?id=1uTv7Zd-xWQkc1zWfX8_yCie-7ik4uoN0
For further information, please contact:
IG Design Group plc Tel: 01525 887310
Paul Fineman, Chief Executive
Giles Willits, Chief
Financial Officer
Cenkos Securities plc Tel: 020 7397 8900
Stephen Keys
Harry Hargreaves
Alma PR Tel: 0208 004 4217
Rebecca Sanders-Hewett designgroup@almapr.co.uk
Susie Hudson
Sam Modlin
Background to and strategic rationale for the Acquisition
The Company has stated previously that it would seek to create
value through both organic growth and well considered acquisitions.
The Directors have for some time been aware of Impact Innovations
and are now delighted to announce that the Group has secured the
Acquisition, which they believe presents significant opportunities
for the Group. In particular, the Directors believe that the
Acquisition will create the world's largest consumer gift packaging
business, which will allow the Group to:
-- Expand into the growing seasonal décor product category;
-- Establish scale within the USA as well as leading capability
in gift packaging manufacturing by leveraging the Group's
know-how;
-- Deliver enhanced "one stop shop" product and service solutions for customers;
-- Leverage Impact Innovations' and Design Group's existing
customer relationships to target cross-selling opportunities in the
longer term;
-- Achieve estimated annual synergies in excess of US$5.0
million by the third year of ownership;
-- Deliver significant earnings accretion in each of the next three years.
It is estimated that the combined business will account for
approximately 22 percent of the overall consumer gift packaging
market in the USA and Canada and have the ability to build its
share further in the growing seasonal fabric and décor market.
About Impact Innovations
Founded in 1968 and employing more than 250 staff globally,
Impact Innovations is a designer, manufacturer and distributor of
seasonal and special occasions products specialising in paper,
fabric and décor. The Company is headquartered in Clara City,
Minnesota, where its fabric and décor business is located, and its
gift wrap manufacturing, warehousing and distribution facilities
are located in Memphis, Tennessee. Impact Innovations has
additional manufacturing operations in Shaoxing, China and offices
in Hong Kong.
Impact Innovations has long-term relationships with major US
retailers, including Walmart, Shopko, Target, Kroger, and Meijer
all of which have been in place for in excess of 20 years. In
particular, the Directors have been impressed by the strength and
depth of the relationship that Impact Innovations has with its
largest customer, Walmart, which is expected to account for over 15
percent of total Group turnover following the Acquisition. Impact
Innovations has received multiple supplier-related awards for its
service to customers, including from Walmart.
For the year ended 31 December 2017, Impact Innovations recorded
Underlying EBITDA* of US$15.0 million and profits before tax of
US$7.1 million on revenues of US$155.9 million and, as at 31
December 2017, had gross assets of US$73.5 million.
*earnings before interest, tax, depreciation, amortisation,
excluding costs relating to Impact Innovations' historical employee
stock ownership plan and other one-off costs
Consideration
The Company's total funding requirement in relation to the
Acquisition is GBP84.4 million**. Of this GBP56.5 million**
represents the debt free/cash free purchase price, with the balance
used to fund a working capital and other adjustment which is the
result of the business being acquired during its peak working
capital period. Funds used in respect of the working capital and
other adjustment are expected to be repaid within 3 months of the
transaction completing from Impact Innovations' operating cash
flows.
The Company's funding requirements in respect of the Acquisition
will be satisfied through the net proceeds of the First Tranche
Placing Shares, the issuance at the Placing Price of new ordinary
shares of 5 pence each in the capital of the Company with an
aggregate value of $20 million (the "Consideration Shares"), and
through the extension of the Group's existing debt facilities. The
number of Consideration Shares to be issued shall be calculated on
the basis of the prevailing exchange rate on 30 August 2018, being
the day immediately prior to the expected completion date of the
Acquisition. It is expected that the enlarged Group's average
leverage, post the Acquisition and Placing for the year ending 31
March 2019 will be 1.3x Underlying EBITDA.
The Consideration Shares are being issued to John Dammermann,
Chief Executive Officer of Impact Innovations, and persons closely
associated with him, and are subject to a phased 6-12-24 month
lock-in followed by a twelve-month orderly market in respect of
each tranche. Mr Dammermann is entering into a new service contract
as part of the Acquisition and will remain with the combined
business.
**based on a foreign exchange rate of US$1.30:GBP1
The Placing
The Company proposes to raise GBP50 million gross proceeds
(GBP48.3 million net of expenses ("Net Proceeds")) from the issue
of the Placing Shares at the Placing Price through Cenkos
Securities plc ("Cenkos") pursuant to: (i) a conditional agreement
dated 27 August 2018 in relation to the First Tranche Placing
Shares; and (ii) a conditional agreement dated 27 August 2018 in
relation to the Second Tranche Placing Shares. The Placing is not
conditional upon completion of the Acquisition, and is not
underwritten.
The First Tranche Placing Shares shall be used satisfy the
funding requirements in relation to the Acquisition and is not
subject to shareholder approval. The Second Tranche Placing Shares
will be subject to shareholder approval of related resolutions at
the General Meeting.
Use of proceeds of the Placing
The Net Proceeds of the Placing will be used to:
-- satisfy in part the funding requirements in respect of the Acquisition; and
-- fund the capital expenditure of the enlarged group and
provide resources to capitalise on other opportunities in line with
its strategy which the Directors expect to arise.
General Meeting
A General Meeting to consider and approve the Second Tranche
Placing Shares will be held at IG Design Group plc, 7 Water End
Barns, Eversholt, Bedfordshire MK17 9EA, United Kingdom at 11.00
a.m. on 17 September 2018. A circular will be posted to
shareholders on 29 August 2018 and will be made available on the
Company's website at www.thedesigngroup.com.
Total Voting Rights
Application has been made for the First Tranche Placing Shares
and Consideration Shares to be admitted to AIM, and it is expected
that admission of the First Tranche Placing Shares and
Consideration Shares will become effective at 8.00 a.m. on or
around 29 August 2018 and 4 September 2018 respectively.
Following admission of the First Tranche Placing Shares, the
Company's issued ordinary share capital will comprise 71,258,394
ordinary shares, none of which are held in treasury. Therefore, the
total number of ordinary shares with voting rights in the Company
following admission of the Placing Shares will be 71,258,394.
Further announcements will be made on the total voting rights
following the admission of the Consideration Shares and the
admission of the Second Tranche Placing Shares.
The above figure 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 FCA's Disclosure Guidance and
Transparency Rules.
Recommendation
The Board believes that the Second Tranche Placing Shares is in
the best interests of the Company and its shareholders.
Accordingly, the Board recommends Shareholders to vote in favour of
the resolutions to be put to the General Meeting as they intend so
to do in respect of their beneficial shareholdings amounting to
28,796,476 or 44.3% of the existing ordinary shares.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
2018
Announcement of the Acquisition 28 August
and Placing
Admission and commencement of 29 August
dealings of the First Tranche
Placing Shares
Posting of General Meeting Circular 29 August
Admission and commencement of 4 September
dealings of the Consideration
Shares
Latest time and date for receipt 11.00 a.m. on
of Forms of Proxy 13 September
General Meeting 11.00 a.m. on
17 September
Admission and commencement of 8.00 a.m. on
dealings of the Second Tranche 19 September
Placing Shares if the Resolutions
are passed
The Second Tranche Placing Shares 19 September
credited to CREST stock accounts
if the Resolutions are passed
Despatch of definitive share week commencing
certificates for Second Tranche 24 September
Placing Shares if the Resolutions
are passed
Notes:
(i) References to times in this Announcement are to London time (unless otherwise stated).
(ii) If any of the above times or dates should change, the
revised times and/or dates will be notified by an announcement to
an RIS.
IMPORTANT INFORMATION
This Announcement includes statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates", "plans",
"anticipates", "targets", "aims", "continues", "expects",
"intends", "hopes", "may", "will", "would", "could" or "should" or,
in each case, their negative or other variations or comparable
terminology. These forward-looking statements include matters that
are not facts. They appear in a number of places throughout this
Announcement and include statements regarding the Directors'
intentions, beliefs or current expectations concerning, amongst
other things, the Group's results of operations, financial
condition, liquidity, prospects, growth, strategies and the
industries in which the Group operates. By their nature,
forward-looking statements involve risk and uncertainty because
they relate to future events and circumstances. A number of factors
could cause actual results and developments to differ materially
from those expressed or implied by the forward-looking statements,
including, without limitation: ability to find appropriate
investments in which to invest and to realise investments held by
the Group; conditions in the public markets; the market position of
the Group; the earnings, financial position, cash flows, return on
capital and operating margins of the Group; the anticipated
investments and capital expenditures of the Group; changing
business or other market conditions; changes in political or tax
regimes, exchange rates and clients; and general economic
conditions. These and other factors could adversely affect the
outcome and financial effects of the plans and events described
herein. Forward-looking statements contained in this Announcement
based on past trends or activities should not be taken as a
representation that such trends or activities will continue in the
future. Subject to any requirement under the Prospectus Rules, the
Disclosure Guidance and Transparency Rules, the AIM Rules or other
applicable legislation or regulation, neither the Company nor
Cenkos undertake any obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Investors should not place undue
reliance on forward-looking statements, which speak only as of the
date of this Announcement.
No statement in this Announcement or incorporated by reference
into this Announcement is intended to constitute a profit forecast
or profit estimate for any period, nor should any statement be
interpreted to mean that earnings or earnings per share will
necessarily be greater or lesser than those for the relevant
preceding financial periods for the Company.
This Announcement contains information regarding the Company's
business and the markets in which it operates and competes, which
the Company has obtained from various third party sources. Where
information has been sourced from a third party it has been
accurately reproduced and, so far as the Company is aware and is
able to ascertain from the information published by that third
party, no facts have been omitted which would render the reproduced
information inaccurate or misleading. Such information has not been
audited or independently verified.
Certain data in this Announcement, including financial,
statistical and operating information, has been rounded. As a
result of rounding, the totals of data presented in this
Announcement may vary slightly from the actual arithmetic totals of
such data. Percentages have also been rounded and accordingly may
not add to 100 percent.
This Announcement is for information purposes only and shall not
constitute an offer to buy, sell, issue, or subscribe for, or the
solicitation of an offer to buy, sell, issue, or subscribe for any
securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction.
This Announcement has been issued by and is the sole
responsibility of 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 Cenkos
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.
Cenkos, which is a member of the London Stock Exchange, is
authorised and regulated in the United Kingdom by the Financial
Conduct Authority and is acting as nominated adviser and broker for
the purposes of the AIM Rules for Companies exclusively for Design
Group in connection with the matters referred to in this
Announcement and for no-one else and will not be responsible to
anyone other than Design Group for providing the protections
afforded to the clients of Cenkos nor for providing any advice in
relation to the contents of this Announcement or any transaction,
arrangement or matter referred to herein. The responsibilities of
Cenkos, as nominated adviser, are owed solely to the London Stock
Exchange and are not owed to the Company or to any director or any
other person and accordingly no duty of care is accepted in
relation to them. This Announcement has been issued by and is the
sole responsibility of 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 Cenkos
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.
The distribution of this Announcement in certain jurisdictions
may be restricted by law. No action has been taken by the Company
or Cenkos that would permit possession or distribution of this
Announcement in any jurisdiction where action for that purpose is
required. Persons into whose possession this Announcement comes are
required by the Company and Cenkos to inform themselves about, and
to observe such restrictions.
Neither the content of the Company's website nor any website
accessible by hyperlinks on the Company's website is incorporated
in, or forms part of, this Announcement.
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
ACQPGUCARUPRUAR
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