TIDMLTG
RNS Number : 9882L
Learning Technologies Group PLC
24 April 2018
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT
CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMATION,
OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE
OR DISPOSE OF ANY SECURITIES IN LEARNING TECHNOLOGIES GROUP PLC OR
ANY OTHER ENTITY IN ANY JURISDICTION. NEITHER THIS ANNOUNCEMENT NOR
THE FACT OF ITS DISTRIBUTION SHALL FORM THE BASIS OF, OR BE RELIED
ON IN CONNECTION WITH, ANY INVESTMENT DECISION IN RESPECT OF
LEARNING TECHNOLOGIES GROUP PLC. PLEASE SEE THE IMPORTANT NOTICE AT
THE OF THIS ANNOUNCEMENT.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF REGULATION 596/2014 ("MAR").
24 April 2018
Learning Technologies Group plc
("LTG" or the "Company" or the "Group")
Proposed Acquisition of PeopleFluent for $150 million (GBP107
million)
New and complementary talent management platform and
capabilities
Transformational for US presence
Immediately and significantly earnings enhancing
Learning Technologies Group plc ("LTG"), the integrated
e-learning services and technologies provider, is pleased to
announce that it has entered into a conditional agreement (the
"Merger Agreement") to acquire the entire issued and outstanding
shares of capital stock of PeopleFluent Holdings Corp.
("PeopleFluent"), the leading independent provider of cloud based
integrated recruiting, talent management, and compensation
management solutions, from Bedford Funding I, L.P. and Bedford HCM
Holdings GP, LLC by way of a reverse subsidiary merger (the
"Acquisition") for a cash consideration of $150 million (GBP107
million)(1) (on a cash free, debt free basis), plus transaction
costs. The consideration and transaction costs for the Acquisition
are intended to be funded by a placing of new ordinary shares (the
"Placing") raising approximately GBP80 million, which is conducted
outside the United States, and up to c.$48 million (c.GBP35
million) (1) in incremental debt financing(2) .
The Board believes that the Acquisition has a compelling
strategic and financial rationale:
-- Complementary fit to LTG
o Strong strategic fit and operational benefits
o Capability, geography and verticals aligned with LTG's
strategy, servicing approximately 50% of the Fortune 100
-- Attractive market opportunity
o Large and growing addressable market
o Positive industry tailwinds fuelling market opportunity
o Increasing importance of talent productivity solutions
-- PeopleFluent well positioned to capitalise
o Industry leader with scale
o Multiple avenues of growth with significant opportunity within
existing client base
-- Compelling financial profile
o PeopleFluent will be a significant addition to LTG - 2017:
c.GBP82.8 million(3) revenue (of which 86% recurring) and c.GBP9.2
million(3) Adjusted EBIT
o Would take LTG to c.GBP135 million revenue business, with
Platforms expected to represent 77%(4) of revenues
o LTG recurring revenue increases to c.68%(4) , from c.39%
o LTG Adjusted EBIT increases to c.GBP23.3 million(3)
o Strong sustained cash flow generation
-- Significant cost savings and synergies identified
o Review and integration process to be completed within the
first 100 days
o LTG track record of successfully integrating acquisitions,
cost management and margin improvement
o Focus on increasing sales productivity, more efficient
application of R&D investment and monitoring of chargeable time
and utilisation to achieve comparable levels to LTG
o Revenues are expected to reduce in the near term; however,
management are confident of their ability to materially improve
EBIT margin
o Target EBIT margin of at least 20% for PeopleFluent in FY
2019
o Total non-recurring costs of up to $3.0 million will be
incurred in order to deliver these synergies and make important
investments related to the PeopleFluent Business
o Acquisition will be immediately and significantly earnings
enhancing in 2018 (based on expected completion by 31 May 2018)
o Potential for cross-selling will help to underpin further
opportunities for growth
1. Based on current USD / GBP exchange rate of 0.7166 as on 23 April 2018.
2. Amount raised through placing and debt financing expected to
contribute to transaction fees with balance remaining with LTG as
contingency cash. Total debt finance facility of $63 million
subject to covenants: cash flow cover of greater than 1.1:1 from Q1
2019 and leverage not to exceed 2.75:1
3. Based on 2017 unaudited revenue of $106.6m and Adjusted EBIT
of $11.9m converted to GBP at an average FY2017 USD / GBP FX Rate
of 0.7766. KZO financials not included for full year impact from
FY2016. Subject to restatement in accordance with the Company's own
accounting principles and policies. Aggregated amounts for LTG and
PeopleFluent in this presentation are included for illustrative
purposes only. This should not be construed as a profit forecast
and should therefore not be interpreted to mean that EBIT in any
future financial period will necessarily match or be greater than
those for the relevant preceding financial period.
4. Based on GBP21.6 million Platforms revenue from LTG (41% of
total 2017 LTG Revenue). Recurring revenue represents 39% of total
revenue for LTG. GBP82.8 million PeopleFluent revenue of which 86%
is recurring revenue. This should not be construed as a profit
forecast and should therefore not be interpreted to mean that
revenues in any future financial period will necessarily match or
be greater than those for the relevant preceding financial
period.
Completion of the Acquisition is conditional upon, among other
things, completion of the Placing, the incremental debt financing
being available at completion of the Acquisition, all applicable
waiting periods (and extensions thereof) under the U.S.
Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have
expired or otherwise been terminated by the parties, and the Merger
Agreement not being terminated, in each case, in accordance with
the terms of the Merger Agreement.
Subject to the fulfilment of the above conditions, the
Acquisition is expected to complete shortly after the satisfaction
of the U.S. anti-trust condition which is expected to take
approximately two weeks if the U.S. anti-trust authorities grant
early termination of the statutory waiting period, and 30 days or
more if early termination is not granted. Completion of the
Acquisition is therefore expected to occur in May 2018. Details of
the conditions to the Acquisition are also set out in this
announcement below.
Commenting on the proposed Acquisition, Jonathan Satchell, Chief
Executive of LTG, said:
"I am delighted to announce the proposed acquisition of
PeopleFluent, a leading talent management platform that will be
transformative for our US presence and brings us new and
complementary capabilities. Learning and talent are closely aligned
and integrated talent and learning solutions will become vital as
the pressure increases on corporates to attract, develop and retain
people.
This acquisition is fully aligned with our stated strategy from
a capabilities, sector, geographic and financial profile
perspective. PeopleFluent brings a large installed base of
customers and significantly expands our international footprint
with its US presence. We believe the financial effects of the
acquisition are highly compelling."
Commenting on the proposed Acquisition, Andrew Brode,
Non-Executive Chairman of LTG, said:
"I am excited by the potential of an enlarged LTG, incorporating
PeopleFluent - we will now be a business with estimated GBP135m
revenue and a strong platform for future growth. This is a
transformational moment for LTG. The team from PeopleFluent are
joining an exciting journey as we look to consolidate the growing
yet fragmented corporate learning and talent management
industry."
For the purposes of MAR and Article 2 of Commission Implementing
Regulation (EU) 2016/1055, this Announcement is being made on
behalf of the Company by Neil Elton.
Enquiries:
Learning Technologies Group plc
Jonathan Satchell, Chief Executive +44 (0)20 7402
Neil Elton, Group Finance Director 1554
Goldman Sachs International (Financial Adviser
and Corporate Broker)
Nick Harper
Khamran Ali
James A Kelly (Corporate Broking) +44 (0)20 7774
Adam Laikin (Corporate Broking) 1000
Numis Securities Limited (NOMAD and Corporate
Broker)
Stuart Skinner
Nick Westlake
Michael Wharton +44 (0)20 7260
Ben Stoop (Corporate Broking) 1000
FTI Consulting (Public Relations Adviser)
John Waples
Rob Mindell +44 (0)20 3727
Jamie Ricketts 1000
Notes to Editors
About LTG:
LTG is a leader in the high growth workplace e-learning
industry. The Group offers truly end-to-end learning solutions
ranging from strategic consultancy, through a range of content and
platform solutions to analytical insights that enable corporate and
government clients to meet their performance objectives.
LTG is admitted to trading on the AIM market of the London Stock
Exchange (LTG.L) and headquartered in London. The Group has offices
in Europe, the United States, Asia-Pacific and South America.
About PeopleFluent:
As a leader in human resources solutions for the digital
enterprise, PeopleFluent helps companies build and power a
productive workforce. It serves the global market, with specific
capabilities for healthcare, financial services, manufacturing, and
retail. Its solutions adapt to complex talent processes, while
clarifying their strategic value.
PeopleFluent's Talent Productivity Platform unifies talent
acquisition and talent management into a single, collaborative
experience that can attract the best candidates, can help managers
make better decisions, and can empower employees to grow their
careers.
PeopleFluent works with large and multinational organizations
-including 50% of the Fortune 100.
IMPORTANT NOTICE
This Announcement may contain "forward-looking statements" with
respect to certain of the Company's plans and its current goals and
expectations relating to its future financial condition,
performance, strategic initiatives, objectives and results.
Forward-looking statements sometimes use words such as "aim",
"anticipate", "target", "expect", "estimate", "intend", "plan",
"goal", "believe", "seek", "may", "could", "outlook" or other words
of similar meaning. By their nature, all forward-looking statements
involve risk and uncertainty because they relate to future events
and circumstances which are beyond the control of the Company,
including amongst other things, United Kingdom domestic and global
economic business conditions, market-related risks such as
fluctuations in interest rates and exchange rates, the policies and
actions of governmental and regulatory authorities, the effect of
competition, inflation, deflation, the timing effect and other
uncertainties of future acquisitions or combinations within
relevant industries, the effect of tax and other legislation and
other regulations in the jurisdictions in which the Company and its
respective affiliates operate, the effect of volatility in the
equity, capital and credit markets on the Company's profitability
and ability to access capital and credit, a decline in the
Company's credit ratings; the effect of operational risks; and the
loss of key personnel. As a result, the actual future financial
condition, performance and results of the Company may differ
materially from the plans, goals and expectations set forth in any
forward-looking statements. Any forward-looking statements made in
this Announcement by or on behalf of the Company speak only as of
the date they are made. Except as required by applicable law or
regulation, the Company expressly disclaims any obligation or
undertaking to publish any updates or revisions to any
forward-looking statements contained in this Announcement to
reflect any changes in the Company's expectations with regard
thereto or any changes in events, conditions or circumstances on
which any such statement is based.
This document and the information contained herein does not
contain or constitute an offer to sell or a solicitation of an
offer to subscribe or buy any securities referred to herein in the
United States. Any securities referred to herein have not been and
will not be registered under the United States Securities Act of
1933, as amended (the "Securities Act") or with any securities
regulatory authority of any state or jurisdiction of the United
States or under the securities laws or with any securities
regulatory authority of any state or other jurisdiction of the
United States and accordingly no securities referred to herein may
be offered, sold, resold, pledged, delivered or transferred,
directly or indirectly, in, into or within the United States except
pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the US Securities Act and, in each
case, in compliance with the securities laws of any relevant state
or other jurisdiction of the United States. There is no intention
to register any portion of the Placing in the United States or to
conduct any public offering of securities in the United States.
This document and the information contained herein does not
contain or constitute an offer of securities for sale, or
solicitation of an offer to purchase securities, in Australia,
Canada, Japan or the Republic of South Africa or any other
jurisdiction where such an offer or solicitation would be unlawful
and any securities referred to herein have not been and will not be
registered under the securities laws of Australia, Canada, Japan or
the Republic of South Africa or any other jurisdiction where any
offer of such securities would breach any applicable law, and may
not be offered, sold, resold, or delivered, directly or indirectly,
within Australia, Canada, Japan or the Republic of South Africa, or
in any jurisdiction where it is unlawful to do so, except pursuant
to an applicable exemption.
Goldman Sachs International, which is authorised in the United
Kingdom by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation
Authority, is acting for the Company and no-one else as financial
advisor in connection with the contemplated acquisition. Neither
Goldman Sachs International nor its affiliates, partners,
directors, officers, employees or agents are responsible to anyone
other than the Company for providing the protections afforded to
clients of Goldman Sachs International or for providing advice in
connection with the contemplated acquisition or for any other
matters referred to herein.
Numis, which is authorised and regulated in the United Kingdom
by the Financial Conduct Authority, is and is acting as nominated
adviser and joint broker for the Company and no-one else in
connection with the contemplated acquisition. Neither Numis nor its
affiliates, partners, directors, officers, employees or agents are
responsible to anyone other than the Company for providing the
protections afforded to clients of Numis or for providing advice in
connection with the contemplated acquisition or for any other
matters referred to herein
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 Goldman Sachs International or Numis or
by any of their respective affiliates, partners, directors,
officers, employees 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.
No statement in this Announcement is intended to be a profit
forecast or estimate, and no statement in this Announcement should
be interpreted to mean that earnings per share of the Company for
the current or future financial years would necessarily match or
exceed the historical published earnings per share of the
Company.
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.
Introduction to PeopleFluent
PeopleFluent provides software solutions and services focused on
talent management. PeopleFluent's talent management platform covers
all aspects of the employee lifecycle, including recruitment,
development, performance and compensation. PeopleFluent is
headquartered in Waltham, MA and has other offices in Raleigh, NC,
Irving, TX, Canada and the UK.
PeopleFluent's product offerings are primarily captured in the
following product divisions:
-- Talent Acquisition / Talent Management (TA / TM): TA products
include modules focused on recruiting, interview and on-boarding
that engage candidates and hiring managers. TM products include
modules focused on managing compensation, performance, succession
planning and learning activities. TA / TM contributed approximately
60% to PeopleFluent's group revenue in 2017.
-- Workforce Compliance & Diversity (WCAD): Tracks
compliance of hiring and compensation practices with Government
regulations. WCAD helps companies establish, communicate and track
metrics to achieve diversity and inclusivity goals, including
offering services to create affirmative action plans, expert
reports, diversity, training and monitoring services. WCAD segment
contributed approximately 17% to PeopleFluent's group revenue in
2017.
-- Vendor Management (VMS): Solution focused on enabling
customers to manage and track the entire contingent labour
workforce on one easy-to-use vendor neutral platform. VMS can track
contingent labour spending including managing the customers'
vendors through consolidated invoicing and also managing payments
to the customers' vendors. VMS provides full visibility into cost,
compliance, risk and efficiency. VMS contributed approximately 16%
to PeopleFluent's group revenue in 2017.
-- Workforce Planning & Analytics (WPA): Provides
visualization and charting tools to assist customers in managing
the workforce. WPA incorporates customizable metrics that can be
easily shared between managers, teams or entire business units. WPA
contributed approximately 7% to PeopleFluent's group revenue in
2017.
PeopleFluent will be a significant addition to LTG with a
compelling margin enhancement opportunity:
($ in millions) FY 2016 FY 2017 (Unaudited)
----------------- -------- --------------------
Revenue 114.6 106.6
----------------- -------- --------------------
Adjusted EBITDA 0.6 13.4
----------------- -------- --------------------
Adjusted EBIT (1.2) 11.9
----------------- -------- --------------------
Note: PeopleFluent financials are based on US GAAP accounting
standards.
The Board believes that PeopleFluent is an attractive
acquisition opportunity for the following reasons:
-- Attractive market opportunity: PeopleFluent operates in a
large and growing addressable market which is fuelled by a number
of industry tailwinds including the increasing importance of talent
productivity solutions. HR challenges are becoming increasingly
complex with most HR leaders worried about the future.
-- PeopleFluent is well positioned to capitalise on the market
opportunity: PeopleFluent is an industry leader with scale and has
multiple avenues for growth, including a significant opportunity
for growth within the existing client base.
-- Compelling financial profile: PeopleFluent has highly visible
recurring revenue, a positive and growing EBIT and the Board
believes that it is well positioned for revenue growth in the
medium term.
Transaction details
The Acquisition is for $150 million (on a cash free, debt free
basis), payable in cash upon completion of the Acquisition. The
consideration, will be funded by proceeds of the Placing and
incremental debt financing. Committed debt financing includes a $42
million term loan and $21 million revolving credit line.
Uncommitted financing includes an acquisition accordion of $28
million.
The Acquisition is conditional upon, among other things:
-- Completion of the Placing - being, admission of the new
ordinary shares to be allotted and issued pursuant to the Placing
to trading on AIM by no later than 8.00 a.m. on 27 April 2018;
-- Availability of the Financing under the New Facility - being,
each of the conditions to the provision and funding of the
financing under the New Facility having been satisfied and complied
with or waived and such financing having occurred at (or occurring
simultaneously with) completion of the Acquisition;
-- Anti-trust Filings - being, all applicable waiting periods
(and extensions thereof) under the U.S. Hart-Scott-Rodino Antitrust
Improvements Act of 1976 shall have expired or otherwise been
terminated by the parties; and
-- No Termination of the Merger Agreement - being, the Merger
Agreement not being terminated in accordance with its terms.
Subject to the fulfilment of the above conditions, the
Acquisition is expected to complete shortly after the satisfaction
of the U.S. anti-trust condition which is expected to take
approximately two weeks if the U.S. anti-trust authorities grant
early termination of the statutory waiting period, and 30 days or
more if early termination is not granted. Completion of the
Acquisition is therefore expected to occur in May. Details of the
conditions to the Acquisition are also set out in this announcement
below.
Following the Acquisition, and taking account of the Group's New
Facility, the enlarged group's pro forma leverage is estimated to
be approximately 1.4x. Due to PeopleFluent's c. 90% cash
conversion, we expect pro forma leverage to be approximately 1.0x
by December 2018.
Acquisition Rationale
The Acquisition is in line with LTG's strategy to build an
international leader in e-learning solutions through expanding
their offering organically and through strategic partnerships and
via acquisitions.
LTG's acquisition strategy places emphasis on broadening
geographical reach (particularly in the United States), with a
particular focus on developing presence in highly regulated sectors
(e.g. pharmaceutical, energy and aviation).
The Acquisition will bring to the Group a leading talent
platform with scale:
-- c.$106 million of revenue
-- Offers a broad and deep talent management suite
-- Fully digital, interactive video and social collaboration platform
-- 2,200+ total enterprise customers including c. 50% of the Fortune 100
-- High recurring revenue of approximately 86%
-- Compelling margin enhancing opportunity
The Board believes the Acquisition, which is expected to be
immediately and significantly earnings enhancing (based on expected
completion by 31 May 2018), is at an attractive valuation and
provides access to a high growth market.
Update on 2020 Strategic goal
The goal, announced in October 2017, of run-rate EBIT in excess
of GBP25m by end of 2020 achieved through organic growth and
M&A financed through cash and debt remains. We will report
progress on this goal excluding the impact of PeopleFluent.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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