TIDMSFOR
RNS Number : 1037P
S4 Capital PLC
08 October 2019
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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
S4 Capital plc 8 October 2019
S4 Capital plc
("S(4) Capital" or the "Company")
Merger of MediaMonks and Firewood Marketing Inc.
("Firewood")
Firm Placing and Placing and Open Offer of 70,422,535 New
Ordinary Shares in the Company
and
Notice of General Meeting
MediaMonks merges with Firewood, Silicon Valley's largest
digital agency(1) to take S(4) Capital's purely digital faster,
better, cheaper model to a new level
S(4) Capital plc (SFOR.L), the new age, new era digital
advertising and marketing services company, announces that its
digital global content practice MediaMonks today merges with
Firewood, an international digital marketing agency built on
extensive partnerships with some of the world's best-known
technology brands. Firewood is the largest independent agency in
Silicon Valley and, along with MediaMonks, has recently been ranked
as one of the fastest growing agencies by Adweek. Firewood is a
leading proponent of the "embedded" model of client partnership, a
deeply collaborative way of working with clients to deliver on
speed, quality and value. A video introducing Firewood can be
viewed on MediaMonks' YouTube channel.
Founded in 2010 by Juan and Lanya Zambrano, Firewood offers a
broad range of digital capabilities including creative, strategy
and planning, performance media and technology services.
Headquartered in San Francisco, the agency employs over 300 people
in 7 offices across the Americas and Europe, in San Francisco,
Mountain View, Sandpoint, New York, Dublin, London and Mexico City.
Revenues are targeted to reach $73 million in 2019(2) , up over 30%
on 2018 and have grown by over 60% and 70% in the years 2017 and
2018. Earnings before interest depreciation and amortisation
("EBITDA ") and EBITDA margins have also grown very strongly over
the same period. Consideration will be $112,500,000, approximately
half in cash and half in S(4) Capital Ordinary Shares, on
completion. A further payment of $37,500,000 will be made on
publication of Firewood's accounts for 2019, if budgeted EBITDA is
reached.
Firewood employs a pioneering and disruptive engagement model
with their roster of well-known clients including Facebook, Google,
LinkedIn, Salesforce and VMware. To combat the inefficiencies found
in traditional agencies, Firewood deploys teams of creative and
strategic marketing professionals who work as extensions of their
clients' internal marketing team. Their client/agency partnership
model is based on the three core principles of collaboration,
integration and flexibility. Firewood's approach has been embraced
by clients seeking a more agile, efficient and transparent way of
working.
For S(4) Capital, today's announcement is another important
strategic step towards delivering a purely digital, first party
data-driven, faster, better and cheaper content and programmatic
offer for clients worldwide, with a unitary business model.
Sir Martin Sorrell, Senior Monk and Executive Chairman of S(4)
Capital said: "This merger is a further step in creating a new era
communications services leader. Firewood has an enviable client
list comprising many of Silicon Valley's finest; and we are
delighted to welcome Juan, Lanya and their colleagues to the S(4)
Capital family. We will now have over 1,800 professionals in 23
countries, with over 500 in each of two nodes, one in Silicon
Valley and one in Amsterdam."
Wesley ter Haar, Founding Monk and COO of MediaMonks said:
"Firewood's "embedded" approach will allow us to build deeper and
broader relationships with our clients, helping us work in a more
flexible, collaborative and integrated way."
Lanya Zambrano, Founder and President of Firewood commented:
"This merger is recognition of all our people. The richness of our
differences creates our collective value. We embrace finding
diverse talent; as a certified Women/Minority-owned Business
Enterprise, 38% of our employees are from diverse ethnic
backgrounds, 67% are women, and our leadership team is comprised of
nearly 64% women. We look forward to developing further a new,
disruptive model in the communications industry with MediaMonks and
S(4) Capital as further proof that diversity is an intrinsic part
of our industry's future."
Juan Zambrano, Founder and CEO of Firewood commented: "We came
from the client world and had a very different and non-agency
mindset. From day one, we created an integrated and disruptive
model built on transparency and collaboration that supported
becoming extensions of our clients and something that other
agencies weren't doing. We are delighted to be teaming up with
MediaMonks and joining the S(4) Capital platform. We believe this
is an exciting next step for our clients and colleagues and we look
forward to continued growth and success."
Further information on the Firewood Merger and the Issue is set
out below and in the Prospectus which the Company expects to
publish today. Further information on the General Meeting is set
out in the Circular which the Company expects to publish today.
(1.)
https://www.bizjournals.com/sanjose/subscriber-only/2019/08/30/largest-advertising-marketing-and-pr.html
(2.) 2019 target revenue is based on based on contracted work as
at 30 June 2019 and an existing pipeline of new client work for the
remainder of the year as at 31 August 2019.
Enquiries
S(4) Capital plc
Sir Martin Sorrell, Executive Chairman
Via Powerscourt
Firewood Marketing, Inc.
Lanya Zambrano
Via Powerscourt
Powerscourt (PR adviser to S(4) Capital plc)
Tel: +44 (0)20 7250 1446
Elly Williamson
Jessica Hodgson
Dowgate Capital Limited (Joint Broker and Joint Bookrunner)
Tel: +44 (0)20 3903 7715
James Serjeant
David Poutney
HSBC Bank plc (Joint Broker, Joint Bookrunner and principal
bankers)
Tel: + 44 (0)20 7991 8888
Sam Barnett
Sam Hart
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 Sir Martin Sorrell, Executive Chairman. In
addition, market soundings (as defined in MAR) were taken in
respect of the Issue 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.
This Announcement should be read in its entirety. In particular,
you should read and understand the information provided in the
"Important Notices" section below.
Expected timetable of events
Record Date for entitlements 7 October 2019
under the Open Offer
Announcement of the Issue, ex-entitlement 8 October 2019
date, expected date and publication
of Prospectus and Circular,
Application Form and Forms of
Proxy
Open Offer Entitlements credited 9 October 2019
to stock accounts in CREST of
Qualifying CREST Shareowners
Recommended latest time for 4.30 p.m. on 17 October 2019
requesting withdrawal of Open
Offer Entitlements
Recommended latest time for 3.00 p.m. on 18 October 2019
depositing Open Offer Entitlements
into CREST
Recommended latest time for 3.00 p.m. on 18 October 2019
splitting Open Offer Application
Forms (to satisfy bona fide
market claims only)
Latest time and date for receipt 11.00 a.m. on 22 October 2019
of completed Open Offer Application
Forms and payment in full under
the Open Offer or settlement
of relevant CREST instructions
(as appropriate)
Latest time and date for receipt 11.00 a.m. on 22 October 2019
of Forms of Proxy and electronic
proxy appointments via CREST
Announcement of the results 7.00 a.m. on 23 October 2019
of the Open Offer
Time and date of the General 11.00 a.m. on 24 October 2019
Meeting
Results of General Meeting announced 24 October 2019
Admission and commencement of 8.00 a.m. on 25 October 2019
dealings in the New Ordinary
Shares
CREST stock accounts expected 25 October 2019
to be credited for the New Ordinary
Shares
Despatch of definitive share within 14 days of Admission
certificates for New Ordinary
Shares (where applicable)
All references are to London times unless otherwise stated. The
dates and times given are indicative only and are based on S(4)
Capital's current expectations and may be subject to change. If any
of the times and/or dates above change, the revised times and/or
dates will be notified to Shareowners by announcement through a
regulatory information service.
Further Information
1. The Merger, the Issue and Additional Acquisitions
On 7 October 2019, the Company and certain of its subsidiaries,
including its direct subsidiary, MergeCo, and Firewood entered into
a merger agreement (the "Merger Agreement") pursuant to which,
conditional upon Admission occurring, Firewood will merge with and
into MergeCo with the effect that, following Admission, Firewood
will be a wholly-owned direct subsidiary of the Company (the
"Firewood Merger"). The transaction values Firewood at $150 million
on a debt-free and cash-free basis and with normalised working
capital, or at an enterprise value to EBITDA multiple of
approximately 13.2x (based on unaudited EBITDA for the last twelve
months ended 31 July 2019). The Firewood Merger is expected to be
significantly accretive to adjusted basic net result per share in
the first full financial year following Completion.
For the year ended 31 December 2018, Firewood generated revenue
of $56.8 million which increased by 71.6 per cent. from $33.1
million in revenue for the year ended 31 December 2017 (unaudited),
which in turn had increased by approximately 61 per cent. from the
year ended 31 December 2016 (unaudited); and its EBITDA (unaudited)
was $10.3 million which increased by 77.5 per cent. from $5.8
million for the year ended 31 December 2017, which in turn had
increased by approximately 40 per cent. from the year ended 31
December 2016.
Further information on the terms of the Merger Agreement is set
out below.
In order to fund the cash component of the consideration payable
in respect of the Firewood Merger, which will be up to $77.5
million, and potential additional acquisitions, the Company
proposes to raise gross proceeds of GBP100 million (GBP98.3 million
net of expenses) through the issue of 70,422,535 New Ordinary
Shares by way of a Firm Placing and a Placing and Open Offer at the
Issue Price of 142 pence per New Ordinary Share. The Issue Price
represents a premium of 1.4 per cent. to the Closing Price of 140
pence per Existing Ordinary Share on 7 October 2019 (being the last
business day prior to the announcement of the Issue).
Further information on the Issue is set out below.
Aligned to its growth strategy, the Directors continue to
evaluate opportunities for further growth through merger and
acquisition to ensure the Company is best placed to deliver on its
objectives. Over the past year, the Company has received approaches
about potential acquisition targets both directly and through its
advisors. This inbound activity continues at a rapid rate, but the
Company has a disciplined, proactive and strategic approach aimed
towards sourcing and reviewing acquisitions in two major
categories:
(a) the Company has identified several important geographies
where the Group does not currently have a presence, or is
underweight, and it is reviewing opportunities to enter and/or
upscale in these markets through merger and acquisition; and
(b) the Company is looking to expand its capabilities in key
strategic areas, the broader focus being on Data, Digital Content
and Programmatic Media, with specific service areas under
consideration including: Marketplace/eCommerce, First-party Data
& Analytics, Social Marketing, Performance Marketing, Marketing
Cloud System Integration, Digital Transformation Consulting,
Transcreation and Content Studios, as it continues to build service
capabilities around the current products and software of companies
such as Adobe, Amazon, Facebook Google and Salesforce.
Given the targeted consideration mix for acquisitions by the
Group is 50 per cent. cash and 50 per cent. Ordinary Shares, and
the fact that the majority of prospective potential merger and
acquisition targets are of a smaller size and cash consideration
than the Firewood Merger, the Directors anticipate completing
several more potential acquisitions in the coming months using the
additional proceeds.
The Group's strategy and implementation therefore continue to
depend on availability of attractive acquisition targets and
availability of obtaining funding on suitable terms to finance such
acquisitions.
2. Strategic Rationale and Expected Benefits of the Firewood Merger
For the reasons set out below, the Directors believe that the
Firewood Merger will further the implementation of the Company's
objective of creating a new era, new media solution embracing data,
content and technology in an always-on environment for global,
multinational, regional and local clients and for millennial-driven
digital brands.
Key industry trends and the opportunity
The Directors have identified a number of key trends in the
marketing and communication services industry. These include:
Pace
Technology has accelerated the speed and cadence in which
clients go to market, reflecting consumers' hastening needs and
shortened attention spans. At this increased pace, higher emphasis
is placed on developing more content, faster, that is rooted in
sound strategic direction and up-to-date and relevant
expertise.
Drive for increased efficiency and effectiveness
Brands and marketers are focussed on efficiency in the delivery
of marketing services. This encompasses both cost-effectiveness of
premium creative content, technology solutions and consulting work,
the speed with which they can be delivered and their responsiveness
once employed. The Directors also believe that brands and marketers
want to do more with less and are increasingly emphasising return
on investment (ROI - i.e. sales generated by advertising
spend).
Shift to digital
Digital advertising spend has grown rapidly since 2017 and is
projected to continue this growth and represent a majority of
global advertising spend by 2022.
Capability consolidation
Marketing services are frequently procured on a fragmented
basis, with specialist agencies and other service providers taking
ownership of only a small part of the delivery of a brand's
marketing messages. The Directors believe that brands are
increasingly emphasising the importance of an end-to-end delivery
skill-set of the kind required to implement large scale and global
digital transformation programmes and to take full ownership of the
deployment of marketing messages.
Decoupling and in-housing
Brands are increasingly considering moving away from traditional
agency relationships and considering instead either in-housing
capabilities or engaging with creative production and technology
services companies directly. The Directors believe the shift to
decoupling and in-housing may be driven, in part, by a lack of
transparency in the legacy agency model and a desire for greater
control over the marketing process.
Change in World's Largest Brands and Largest Spenders
The inaugural "Brandz Top 100" Brands report in 2006 was led by
Microsoft, GE and Coca-Cola.
BRANDZ(TM) RANKING
# Brand Brand Value 2006 (US$ millions)
1 Microsoft 62,039
2 GE 55,834
3 Coca-Cola 41,406
4 China Mobile 39,168
5 Marlboro 38,510
6 Wal-Mart 37,567
7 Google 37,445
8 IBM 36,084
9 Citibank 31,028
10 Toyota 30,201
The latest version of the report in 2019 illustrates that, in
the past decade, the profile of the world's largest brands has
changed dramatically. It is now dominated by technology brands with
7 of the top 10 being internet technology brands.
Brand Brand Value 2019 (US$ millions)
1 Amazon 315,505
2 Apple 309,527
3 Google 309,000
4 Microsoft 251,244
5 Visa 177,918
6 Facebook 158,968
7 Alibaba Group 131,246
8 Tencent 130,862
9 McDonalds 130,368
10 AT&T 108,375
Combination benefits
In the context of the trends outlined above, the Directors
believe that the combination of the MediaMonks Group and Firewood
presents a compelling opportunity to create a highly-differentiated
service offering underpinned by strategic consulting, efficient
premium creative and content production, performance media and
technology services that are all delivered via a hybrid in-housing
model.
The Directors further believe that this combined offering could
be a disruptive force in the advertising and marketing services
industry, able to capitalise on the status quo evidenced by the
shifts in brand and marketing approaches and priorities set out
above. In addition, the Directors believe that the combination of
the MediaMonks Group and Firewood, both fast growing businesses
(and adjudged so by Adweek's fastest growing agency rankings), will
facilitate additional expansion.
Deeper exposure to the US and digital marketing
The US remains by far the largest advertising market in the
world. According to ZenithOptimedia, the US had $217.0 billion of
advertising expenditure in 2018 compared to advertising spend of
$85.2 billion in China. ZenithOptimedia predict spend in the US
will reach over $250 billion in 2021. In addition, ZenithOptimedia
estimates that digital (internet) advertising has risen from 12 per
cent. of total global advertising spend in 2008 to become the
dominant media with a 42 per cent. global market share in 2018.
eMarketer estimates that in 2019 digital marketing spend in the US
will grow by 19 per cent. to $129.3 billion (representing 54.2 per
cent. of estimated total US advertising spending) and that by 2023,
digital will surpass two-thirds of total media spending.
As Firewood is primarily focused on digital marketing in the US,
the Firewood Merger will give the Group greater exposure to both
the world's largest advertising market and the world's largest and
fastest growing media segment.
Expanding the Group's largest client relationships
Prior to the Firewood Merger, Google and other Google Partners
together comprise one of the Group's largest and most important
clients and partners. MediaMonks works with various Google
Stakeholders in the United States, the Netherlands, Singapore and
in other countries. MightyHive is a certified partner across a
broad spectrum of Google products, working with dozens of Google
Partners. A stated goal of the Group is to have scaled
relationships with its largest clients. Revenue generated by Google
and other Google Stakeholders for the Firewood Group increased
significantly during the financial years ended 31 December 2018 and
2017 respectively and represented a significant majority of the
revenue generated by the Firewood Group for such financial years.
The Firewood Merger will propel Google to become the Group's most
significant client, with Google expected to generate a significant
proportion of the Group's revenue following the Firewood Merger.
The Directors believe that strengthening the Group's relationship
and aligning with new era marketers like Google will position the
Group for growth.
Broadening the Group's technology client portfolio
Firewood has built a client list dominated by the leading
technology brands such as Facebook, Google, LinkedIn, Salesforce
and VMware, amongst others. These clients are at various stages of
embracing the "embedded" model and work in a collaborative and
agile way. An important strategic objective for the Group is to
align itself with the world's leading technology companies. The
Group has targeted reciprocal relationships where technology
companies become clients and it builds capabilities to provide
services around its products (as is already evident in the Amazon,
Facebook and Google relationships). The merger with Firewood allows
the Group to significantly expand its technology client portfolio
and its presence in San Francisco/Silicon Valley, the headquarters
for many of the world's leading technology brands. Technology
clients are also expanding their marketing budgets significantly
faster than the overall market growth rate. According to analysis
from Ad Age, spend from technology companies, in particular FANG
(Facebook, Amazon, Netflix and Google - all of whom are clients of
the Group), is expanding rapidly.
Worldwide spending since 2010 for Google parent Alphabet,
Amazon, Facebook and Netflix has increased significantly.
Facebook's advertising spending increased significantly to $1.1
billion in 2018 from $8 million in 2010, and Amazon's spending
increased to $8.2 billion from $890 million.
Among the nation's 100 biggest advertisers, 65 companies
increased US ad spending in 2018. FANG represented approximately 7
per cent. of the top 100's spending yet accounted for nearly 30 per
cent. of the spending increase.
US spending increase for those 65 companies $8.1 billion
US spending increase for FANG $2.4 billion
FANG's portion of spending increase 29.6 per cent
US ad spending for 100 biggest advertisers $131.0 billion
FANG's US ad spending $8.9 billion
FANG's US spending as per cent. of top 100 6.8 per cent
advertisers' spending
As a result, the Directors believe the Firewood Merger will
allow the Group to service these clients and deliver significant
organic growth opportunities, as the Group grows alongside
them.
Helping clients gain control with the "embedded" model as an
alternative to "in-housing"
In-housing is an established and structural trend in the
Marketing Services industry which has gained traction in recent
years. A 2018 report from the Association of National Advertisers
("ANA") in the US stated that 78 per cent. of marketers claim to
use an in-house agency, up from 58 per cent. in 2013. In Europe, a
recent report commissioned by Bannerflow found that 91 per cent. of
marketers have moved at least part of their digital marketing
in-house. The ANA report noted that speed, transparency and the
importance of data were key reasons that clients were moving more
to an in-house model. The survey listed "creative" as the most
common service for in-housing, and "media" and "programmatic"
services were being brought in-house at the fastest pace.
The Directors believe "in-housing" in of itself is not the end
goal of most clients, it is rather a symptom of their desire to
take more control over the marketing process. In reality the
decision to in-house occurs on a spectrum, and whilst most clients
are moving along to the right and taking more control, very few end
up at the fully in-housed extreme. Unlike traditional advertising
holding companies, who, burdened by incumbency reject the trend of
"in-housing"- or at best reluctantly go along with it, S(4) Capital
embraces this trend and has built a business model around it.
The traditional model of a client fully outsourcing all its
marketing needs to an agency is primarily served by the traditional
agency holding companies such as Omnicom, Publicis and WPP. These
relationships were traditionally based on retainers but are
increasingly moving to project-based scopes of work. In recent
years clients have focussed on building their own repositories of
first party consumer data and this has in turn lead to a focus on
data-driven marketing. The desire for speed, responsiveness and
greater value has led clients to explore moving further to the
right hand side of this spectrum and take more control of their
marketing process, experimenting with different models of
engagement including in-housing. This has also been driven by a
desire for greater transparency and accountability, especially in
the area of creative production which was the subject of a US
Department of Justice investigation in 2016, and media buying which
is the subject of ongoing FBI and federal prosecutor investigations
following the ANA's "An Independent Study of Media Transparency in
the US Advertising Industry" published in 2016. However, despite
the trade press and headlines highlighting this trend, few clients
have moved to a fully in-house solution with no reliance on
agencies/partners.
The Group has built a flexible business model which allows it to
help clients establish where on this spectrum they should be
operating and partners with them to deliver innovative solutions in
a transparent manner. Unlike traditional agencies, who are
protecting incumbent revenues and structures, the Group does not
have any entrenched interests and can offer more independent
advice.
MightyHive already operates across the full client engagement
model spectrum: it has a managed service offering for clients and
independent agencies who outsource their programmatic media to it.
The bulk of its revenue comes from consulting with clients such as
Mondelez and Pandora, helping them establish where on the spectrum
they should operate, helping them decide on their programmatic
technology stack, providing enterprise grade systems integration,
data science and analytics around first party data and building and
executing direct relationships with the major digital platforms
such as Amazon, Facebook and Google. MightyHive also offers an
in-housing solution for clients such as Sprint and Bayer who want
to take full control over their programmatic media. It helps such
clients make this transition and provides ongoing support,
maintenance and training.
MediaMonks was originally established to provide digital
creative production services to agencies at one end of the
spectrum. As clients migrated to theother end of the spectrum,
de-coupling production based on transparency and efficiency
concerns, a need for greater speed, agility and demanding
specialists who can deliver creative content and assets at scale,
MediaMonks transitioned its model to work directly with clients and
partners wherever they decide to operate on the spectrum. Recently,
MediaMonks has been collaborating with clients such as Avon and
Shiseido to build and operate dedicated content studios. The
Firewood Merger is expected to extend MediaMonks service offering
to the other end of the spectrum, allowing it to leverage the
"embedded" model that Firewood has pioneered (displayed below) to
work with clients in a flexible, collaborative and integrated
way.
The Directors believe Firewood's collaborative model of client
engagement adds an important, complementary capability for the
Group. Firewood seeks to combat the inefficiencies found in
traditional agencies by deploying teams of creative and strategic
marketing professionals, who work as extensions of their clients'
marketing efforts. Firewood describes it as offering "Quality,
Speed and Value", mirroring the Group's "Faster, Better,
Cheaper".
Talent
The Firewood Merger is expected to add over 300 experienced
digital marketers to the Group who are experienced in both
delivering and recruiting personnel who embrace a client-first,
collaborative approach. Firewood was ranked as a 2018 "Best Place
to Work" by the San Francisco Business Times and Silicon Valley
Business Journal and has an annual turnover rate of just 15 per
cent., half the industry average. The Directors believe the deep
experience and capabilities of the founders and senior management
of Firewood will complement the existing senior leadership at
MediaMonks and MightyHive.
Cross- and up-selling opportunities
The Group and Firewood have complementary client portfolios and
new business pipelines. The Directors therefore believe that the
combination of the Group with Firewood would deliver an opportunity
to leverage existing and future relationships to cross- and up-sell
to existing and future clients.
As at the date of this announcement, the Group has over 1000
clients and Firewood has over 14 with a minimal number of three
overlapping clients, offering significant scope for cross-selling
between the two groups and an increased profile, especially on the
West Coast of the US.
Costs synergies
While the focus of the Group and the Firewood Group is currently
on revenue and gross margin growth, the Directors believe that the
combination will present a number of opportunities to realise
efficiencies. Such efficiencies may include combining certain
central services of the Group and opportunistically exploring real
estate synergies in certain locations.
3. The Merger Agreement
On 7 October 2019, the Company, its direct subsidiary, MergeCo,
Firewood, the holders of Firewood Common Stock (including the
Firewood stock ownership trust (the "Firewood ESOP")) and a
representative of the selling security holders of Firewood entered
into the Merger Agreement pursuant to which Firewood will merge
with and into MergeCo with the effect that, following Admission,
Firewood will be a wholly- owned indirect subsidiary of the
Company.
The Firewood Merger values Firewood at up to $150 million on a
debt-free cash-free basis and with normalised working capital, with
$112.5 million of consideration payable at closing and up to an
additional $37.5 million payable on publication of Firewood's
annual accounts for the year ended 31 December 2019, if its
budgeted EBITDA is reached.
At closing, the holders of the Firewood Common Stock (the
"Firewood Equityowners") will be allotted 28,506,490 New Ordinary
Shares at the Issue Price (the "Consideration Shares") having an
aggregate value of $49.9 million, representing approximately 48.3
per cent. of the consideration due to the Firewood Equityowners
under the Merger Agreement. The remaining consideration payable at
closing to the Firewood Equityowners ($53.3 million, or 51.7 per
cent. of the consideration due at closing to the Firewood
Equityowners) will be settled in cash on the date of Admission.
However, if the 30-day volume weighted average price ("VWAP") of
the Company's Ordinary Shares as at the close of trading two
business days prior to Admission measured in US dollars at the
exchange rate at that time were to decline below the US dollar
equivalent of the Issue Price at signing so that the equity value
of the share consideration was less than 40 per cent. of the total
merger consideration, the Firewood Equityowners would be entitled
to request that a greater number of Consideration Shares at the
Issue Price form part of the total merger consideration, along with
a corresponding decrease in cash consideration, in order for the
equity value of the share consideration (based on the 30-day VWAP)
to represent at least 40 per cent. of the total merger
consideration. If the Company were required to issue Consideration
Shares in addition to the number covered by the Prospectus, the
Company will publish a prospectus or supplementary to the
Prospectus in the event such additional Consideration Shares
(together with any other relevant Ordinary Shares not covered by a
prospectus and issued over the previous 12 months) were to
represent 20 per cent. or more of the Company's Existing Ordinary
Shares.
At closing, the holders of restricted stock units ("RSUs") in
Firewood will have their RSUs accelerated and at closing will
receive, in aggregate, 2,564,936 New Ordinary Shares and $4.8
million in cash. They will also receive deferred consideration, in
the event that it becomes payable.
The Firewood ESOP will receive 100 per cent of its consideration
in cash.
Key Firewood executives will also enter into long-term
employment arrangements in connection with the Firewood Merger.
Pursuant to the Merger Agreement, the Company also agreed to
establish a $5 million share option plan for the people of the
Firewood Group. Pursuant to the plan, options will be issued by the
Company over new Ordinary Shares at market price (or the Issue
Price in relation to the initial grant of options). Half of the
options to be granted to people will be subject to group
performance criteria and the other half (which will be granted
equally to the same people) will be subject to performance criteria
set for individual people. The performance criteria will be tested
after each of the four financial year ends post grant. Where
criteria are met, the options will then vest on the second
anniversary of meeting the criteria.
Under the Merger Agreement, the Group has the benefit of certain
representations and warranties relating to the Firewood Group, its
business and operations. $4.7 million of the cash payable upon
closing of the Merger Agreement and 2,410,714 New Ordinary Shares
will be placed into escrow accounts, from which, subject to the
applicable deductible, the Group will be able to recover general
losses arising from a breach of warranty. A further amount may be
payable into escrow in the event that any deferred consideration is
paid. Under the Merger Agreement, the Group has also made certain
warranties and representations as to its capacity and authority and
as to the accuracy and completeness of this announcement. If such
warranties and representations are breached, the Group has agreed
to indemnify the selling security owners of Firewood for losses
caused by such breach. Completion of the Firewood Merger pursuant
to the Merger Agreement is conditional upon, inter alia: the
representations and warranties made by the parties remaining true
and correct; key executives of Firewood having entered into and not
repudiated their service agreements, non-competition agreements and
Firewood Lock-in Deeds; and the Issue Resolution passing. However,
if the Issue Resolution fails to pass by the requisite majority,
the Company is obligated to use its best efforts to raise
sufficient funds in combination with cash available for the
purposes of the Firewood Merger to complete the Firewood Merger,
pursuant to the outstanding authorities granted to the Directors at
the AGM. If the Company were unable to do so by 15 December 2019,
the Firewood Merger would not complete, and the Company would have
no further obligations to Firewood or the Firewood
Equityowners.
4. Reasons for the Issue and the Use of Proceeds
The Company is proposing to raise net proceeds of GBP98.3
million pursuant to the Firm Placing and the Placing and Open Offer
of 70,422,535 New Ordinary Shares at an Issue Price of 142 pence
per New Ordinary Share. Following Admission, the Company's
principal use of the net proceeds of the Issue will be to pay the
cash payment of $77.5 million due under the Merger Agreement. Such
cash payment is in addition to the remaining $72.5 million which
will be payable in Consideration Shares, as required under the
Merger Agreement.
Of the remaining approximately GBP35.2 million from the net
proceeds, GBP2.7 million is expected to be used to meet other
expenses arising in connection with the Firewood Merger and
Admission. The remaining approximately GBP32.5 million of net
proceeds is expected to be used for general corporate purposes, to
part fund potential acquisitions and to implement the Company's
strategy.
Pursuant to the terms of the Merger Agreement, the Company is
also proposing to issue 41,428,571 Consideration Shares pursuant to
the Consideration Issue at the Issue Price. The Issue is not
subject to an underwriting commitment on a firm commitment
basis.
5. Current Trading and Prospects of the Group
On 11 September 2019, the Company announced that the unaudited
revenue of the Group for the six months ended 30 June 2019 was
GBP88.0 million and that it had unaudited Gross Profit of GBP70.2
million and Operational EBITDA of GBP9.6 million for the same
period. Since 30 June 2019, the business of the Group has performed
in line with the expectations of its management and the Directors.
The Group has, in accordance with its strategy also completed the
IMA Merger and been focused on evaluating and consummating the
Firewood Merger and completing the merger with Biztech, following
the non-binding agreement of key terms in June 2019. The Group
continues to review a number of other complementary opportunities
to further expand the Group and deliver the Company's strategy of
building a multi-national digital communication services
business.
Since 31 December 2018, the Firewood Group has also continued to
perform in line with the expectations of its management for the
year to date.
6. Principal Terms of the Issue
The Company proposes to raise gross proceeds of GBP100 million
(GBP98.3 million net of expenses) through the issue of 70,422,535
New Ordinary Shares by way of a Firm Placing and a Placing and Open
Offer at the Issue Price of 142 pence per New Ordinary Share. The
Issue Price represents a premium of 1.4 per cent. to the Closing
Price of 140 pence per Existing Ordinary Share on 7 October
2019.
The terms of the Issue are set out in full in the Prospectus.
You are recommended to read the whole of the Prospectus and not
rely on any part of it. In particular you are recommended to read
the "Risk Factors" section in that document.
Firm Placing
Pursuant to the Placing Agreement, the Joint Bookrunners have
severally agreed to use their respective reasonable endeavours to
procure Firm Placees for 36,506,852 New Ordinary Shares at the
Issue Price representing gross proceeds of GBP51.8 million. The
Firm Placed Shares are not subject to clawback and are not part of
the Placing and Open Offer.
The terms and conditions of the Firm Placing are set out in
placing letters that have been sent to each Firm Placee.
Placing and Open Offer
The full terms and conditions of the Open Offer will be set out
in the Prospectus. The Open Offer Shares have been conditionally
placed with institutional investors by the Joint Bookrunners,
subject to clawback to satisfy valid applications by Qualifying
Shareowners under the Open Offer.
The Open Offer Shares are being offered to Qualifying
Shareowners by way of the Placing and Open Offer (representing
gross proceeds of GBP48.2 million at the Issue Price). Subject to
certain limited exceptions, at the sole discretion of the Company,
in consultation with the Joint Bookrunners, excluded Overseas
Shareowners will not be able to participate in the Open Offer. The
Open Offer provides an opportunity for Qualifying Shareowners to
participate in the fundraising (subject to compliance with
applicable securities laws) by subscribing for their Open Offer
Entitlement. Qualifying Shareowners will have an Open Offer
Entitlement of:
1 Open Offer Share for every 10.764 Existing Ordinary Shares
registered in the name of the relevant Qualifying Shareowner on
the Record Date and so in proportion to any other number of
Existing Ordinary Shares held (that is, not including any
allocations made in respect of the Firm Placing or the
Placing).
The Open Offer is being made on a pre-emptive basis to
Qualifying Shareowners and is not subject to scaling back. Pursuant
to the Placing Agreement the Joint Bookrunners have severally
agreed to use their respective reasonable endeavours to
conditionally place all of the Open Offer Shares with institutional
investors at the Issue Price subject to clawback to satisfy valid
applications by Qualifying Shareowners under the Open Offer. Any
New Ordinary Shares that are available under the Open Offer and are
not taken up by Qualifying Shareowners pursuant to their Open Offer
Entitlements will be placed under the Placing.
Director Participation
The Directors are interested in an aggregate of 135,715,695
Ordinary Shares (representing approximately 37.2 per cent. of the
Existing Ordinary Shares). Sir Martin Sorrell, Scott Spirit, Oro en
Fools B.V. (the joint personal holding company of Victor Knaap and
Wesley ter Haar) ("Oro en Fools"), Peter Rademaker, Rupert Faure
Walker, Sue Prevezer and Daniel Pinto have irrevocably undertaken
to take up their Open Offer Entitlement (representing 15,594,468
New Ordinary Shares). Paul Roy has undertaken not to take up any of
his Open Offer Entitlements which represent 147,980 New Ordinary
Shares.
Sir Martin Sorrell, Scott Spirit, Peter Rademaker, Rupert Faure
Walker, Paul Roy (through an intermediary), Sue Prevezer and Daniel
Pinto (together, the "S4 Firm Placees") have agreed to subscribe
for, in aggregate, 13,675,734 New Ordinary Shares pursuant to the
Firm Placing; and Sir Martin Sorrell, Scott Spirit, Oro en Fools,
Peter Rademaker, Rupert Faure Walker, Sue Prevezer and Daniel Pinto
(together, the "S4 Placees") have agreed to subscribe for, in
aggregate, 15,594,468 New Ordinary Shares pursuant to the Placing,
which will be subject to clawback in order to satisfy valid
applications of Qualifying Shareowners under the Open Offer. To the
extent the S4 Placees take up their respective Open Offer
Entitlements, their conditional commitment under the Placing will
be reduced by a corresponding number of New Ordinary Shares.
Daniel Pinto is the CEO of Stanhope Capital Group, which manages
SEF4 Investment SCSp ("Stanhope"). Stanhope have irrevocably
undertaken to take up their respective Open Offer Entitlements
(representing 2,553,228 New Ordinary Shares). Stanhope has also
agreed to subscribe for 8,500,000 New Ordinary Shares pursuant to
the Firm Placing and 8,200,000 New Ordinary Shares pursuant to the
Placing, which will be subject to clawback in order to satisfy
valid applications of Qualifying Shareowners under the Open
Offer.
Sir Martin Sorrell has been a member of Stanhope Capital Group's
Advisory Board since September 2011 but is not involved in its
investment decision in relation to the Company.
7. Shareowner Approval and Notice of General Meeting
The Issue requires Shareowner approval to grant the Directors
authority to allot and issue the New Ordinary Shares as if the
applicable statutory pre-emption rights did not apply. The Notice
convening a General Meeting to be held at the offices of Travers
Smith LLP, 10 Snow Hill, London EC1A 2AL at 11.00 a.m. on 24
October 2019 will be sent to Shareowners in the Circular. The
purpose of the General Meeting is to consider, and if thought fit,
pass the Resolutions, to (among other things) approve the Issue as
set out in full in the Notice of General Meeting.
The Issue Resolution proposes that the Directors be authorised
to allot and issue up to 114,708,249 New Ordinary Shares on a
non-pre-emptive basis in connection with the Issue and the Firewood
Merger.
Sir Martin Sorrell holds the B Share, which, when voted against
a resolution proposed at a general meeting of the Company, carries
the right to such number of votes as may be required to defeat the
relevant resolution. Sir Martin has given an irrevocable
undertaking to vote the B Share in favour of all resolutions at the
General Meeting; accordingly, it shall carry one vote.
Irrevocable undertakings to vote in favour of the Resolutions
have been received from 10 Shareowners representing 34.8 per cent.
of the Existing Ordinary Shares.
The Issue will not proceed unless the Issue Resolution is passed
by the requisite majority, and the Firewood Merger is conditional
upon the Issue Resolution passing.
However, according to the terms of the Merger Agreement, if the
Issue Resolution fails to pass, the Company is obligated to use its
best efforts to raise sufficient funds in combination with cash
available for the purposes of the Merger to complete the Merger,
pursuant to the outstanding authorities granted to the Directors at
the AGM. If the Company were unable to do so by 15 December 2019,
the Firewood Merger would not complete, and the Company would have
no further obligations to Firewood or the Firewood
Equityowners.
8. Overseas Shareowners
The availability of the New Ordinary Shares under the terms of
the Open Offer to Shareowners not resident in the UK may be
affected by the laws of the relevant jurisdiction where they are
resident. Such persons should inform themselves about and observe
any applicable requirements. Further details in relation to
Overseas Shareowners will be contained in the Prospectus.
9. Admission and Prospectus
Application will be made to the FCA for admission of the Placing
Shares to the standard listing segment of the official list
maintained by the FCA (the "Official List") and to the London Stock
Exchange plc (the "London Stock Exchange") for admission to trading
of the New Ordinary Shares on the London Stock Exchange's main
market for listed securities (together, "Admission").
In connection with Admission, S(4) Capital expects to publish
the final Prospectus today, following approval by the FCA in
accordance with the Prospectus Rules.
10. Availability of Documents
The Prospectus, Circular and Form of Proxy will, once published,
be available at S(4) Capital's registered office at 12 St James's
Place London SW1A 1NX, and S(4) Capital's website,
www.s4capital.com.com, subject to certain access restrictions. They
will also be submitted to the UK Listing Authority via the National
Storage Mechanism and will be available to the public for
inspection shortly after their publication at
www.morningstar.co.uk/uk/NSM.
This announcement contains inside information.
LEI: 21380068SP9V65KPQN68
Important Notice
This announcement has been prepared by, and is the sole
responsibility of, the Directors of S4 Capital plc.
This announcement is an advertisement and does not constitute a
prospectus relating to the Company and does not constitute, or form
part of, any offer or invitation to sell or issue, or any
solicitation of any offer to purchase or subscribe for, any shares
in the Company in any jurisdiction nor shall it, or any part of it,
or the fact of its distribution, form the basis of, or be relied on
in connection with or act as any inducement to enter into, any
contract therefor. Investors should not make any decision to
purchase, subscribe for, otherwise acquire, sell or otherwise
dispose of any New Ordinary Shares referred to in this announcement
except on the basis of the information contained in the Prospectus
published by the Company.
Recipients of this Announcement who are considering acquiring
New Ordinary Shares following publication of the Prospectus are
reminded that any such acquisition must be made only on the basis
of the information contained in the Prospectus which may be
different from the information contained in this announcement.
The New Ordinary Shares have not been, nor will they be,
registered under the US Securities Act of 1933, as amended (the
"Securities Act") or with any securities regulatory authority of
any state or other jurisdiction of the United States or under the
applicable securities laws of Australia, Canada, Japan, or South
Africa. Subject to certain exceptions, the Ordinary Shares may not
be offered or sold in the United States, Australia, Canada,
Guernsey, Jersey, Japan, Hong Kong Special Administrative Region of
the People's Republic of China or Switzerland or to or for the
account or benefit of any national, resident or citizen of
Australia, Canada, Guernsey, Jersey, Japan, Hong Kong Special
Administrative Region of the People's Republic of China or
Switzerland or any person located in the United States. The Issue
and the distribution of this Announcement in other jurisdictions
may be restricted by law and the persons into whose possession this
Announcement comes should inform themselves about, and observe, any
such restrictions.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained herein are forward-looking
statements and are based on current expectations, estimates and
projections about the potential returns of the Company and the
Group and the industry and markets in which the Group will operate,
the Directors' beliefs, and assumptions made by the Directors.
Words such as "expects", "should", "intends", "plans", "believes",
"estimates", "projects", "may", "targets", "would", "could" and
variations of such words and similar expressions are intended to
identify such forward-looking statements and expectations. These
statements are not guarantees of future performance or the ability
to identify and consummate investments and involve certain risks,
uncertainties, outcomes of negotiations and due diligence and
assumptions that are difficult to predict, qualify or quantify.
Therefore, actual outcomes and results may differ materially from
what is expressed in such forward-looking statements or
expectations. Among the factors that could cause actual results to
differ materially are: the general economic climate, competition,
foreign exchange fluctuations, changes of strategic direction,
minority shareowner action, failure of internal controls, price and
margin pressure, technology developments, systems or network
failures, changes in customer requirements, failure of suppliers to
deliver against contract, availability of suitable acquisition
targets, interest rate levels, loss of key personnel, the result of
legal and commercial due diligence, the availability of equity
financing and/or debt financing on acceptable terms and changes in
the legal or regulatory environment. These forward-looking
statements speak only as at the date of this announcement.
This announcement contains certain forward-looking statements
that are subject to certain risks and uncertainties, in particular
statements regarding the Group's plans, goals and prospects. These
statements and the assumptions that underline them are based on the
current expectations of the Directors and are subject to a number
of factors, many of which are beyond their control. As a result,
there can be no assurance that the actual performance of the Group
will not differ materially from the description in this
announcement. Except as required by applicable law or regulation
(including to meet the requirements of the Listing Rules, MAR, the
Prospectus Rules and/or FSMA), 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 statements are based.
Investors should therefore consider carefully whether investment
in the Company is suitable for them, in light of the risk factors
to be outlined in the Prospectus, their personal circumstances and
the financial resources available to them.
HSBC Bank plc and Dowgate Capital Limited
HSBC Bank plc ("HSBC"), which is authorised by the Prudential
Regulation Authority ("PRA") and regulated in the UK by the PRA and
the FCA, and Dowgate Capital Limited ("Dowgate"), which is
authorised and regulated in the UK by the FCA, are each acting
exclusively for the Company in connection with the Issue. Neither
HSBC nor Dowgate will regard any other person (whether or not a
recipient of this announcement) as a client in relation to the
Issue 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 Issue or any transaction,
matter or arrangement described in this announcement. Apart from
the responsibilities and liabilities, if any, which may be imposed
upon HSBC and Dowgate by the FSMA or the regulatory regime
established thereunder, none of HSBC, Dowgate or any of their
respective affiliates or any of their or their respective
affiliates' directors, officers, partners, members, employees or
advisers ("Representatives") accepts any responsibility whatsoever,
and no representation or warranty, express or implied, is made or
purported to be made by any of them, or on their behalf, for or in
respect of any act or omissions of the Company relating to the
Issue and the contents of this announcement, including its
accuracy, completeness, fairness, verification or sufficiency, or
concerning any other document or statement made or purported to be
made by it, or on its behalf, in connection with the Company, the
New Ordinary Shares, the Issue, and nothing in this announcement
is, or shall be relied upon as, a warranty or representation in
this respect, whether as to the past or future. Each of HSBC,
Dowgate and each of their respective affiliates and Representatives
disclaim, to the fullest extent permitted by law, all and any
liability whether arising in tort, contract or otherwise which they
might otherwise be found to have in respect of the acts or
omissions of the Company in relation to the Issue this announcement
or any such statement.
No representation or warranty, express or implied, is made by
Dowgate or HSBC or any of their respective affiliates as to the
contents of this Announcement, or for the omission of any material
from this announcement, including its accuracy, fairness,
completeness or verification in connection with the Company or the
Issue and nothing in this Announcement is, or shall be relied upon
as, a warranty or representation in this respect, whether as to the
past or future. No liability whatsoever is accepted by either HSBC
or Dowgate or any of their respective affiliates for the accuracy
of any information or opinions contained in this Agreement or for
the omission of any material information, for which the Company is
solely responsible. Neither Dowgate nor HSBC has authorised the
contents of, or any part of, this Announcement and no liability
whatsoever is accepted by Dowgate or HSBC for the accuracy of any
information or opinions contained in this document or for the
omission of any information from this Announcement.
In connection with the Firm Placing and/or Placing and Open
Offer, HSBC, Dowgate and any of their respective affiliates acting
as an investor for their own account(s) may subscribe for New
Ordinary Shares and, in that capacity, may retain, purchase, sell,
offer or otherwise deal for its or their own account(s) in such
securities of the Company, any other securities of the Company or
related investments in connection with the Firm Placing and/or
Placing and Open Offer or otherwise. In addition, HSBC, Dowgate and
their respect affiliates may enter into derivative transactions in
connection with the Firm Placing and/or Placing and Open Offer,
acting at the order and for the account of their business and may
also purchase or hold New Order Shares as a hedge for these
transactions. Accordingly, references in this announcement to
Ordinary Shares being issued, offered, subscribed or otherwise
dealt with should be read as including any issue or offer to, or
subscription or dealing by, HSBC, Dowgate or any of their
respective affiliates acting as an investor for its or their own
account(s). Neither HSBC nor Dowgate (as applicable) intends to
disclose the extent of any such investment or transactions
otherwise than in accordance with any legal or regulatory
obligation to do so.
Company Website
Neither the content of S(4) Capital's website, nor the content
on any website accessible from hyperlinks on its website for any
other website, is incorporated into, or forms part of, this
announcement nor, unless previously published by means of a
recognised information service, should any such content be relied
upon in reaching a decision as to whether or not to acquire,
continue to hold, or dispose of, securities in S(4) Capital.
The person responsible for arranging for the release of this
announcement on behalf of S(4) Capital is Scott Spirit, whose
business address is 12 St James's Place London SW1A 1NX.
Non-IFRS financial measures
The Announcement includes unaudited non-IFRS measures and
ratios, including EBITDA, which are not measures of financial
performance under IFRS.
The Group defines EBITDA as profit or loss for the period before
net finance costs, income taxes, depreciation and amortisation,
impairment and gains/(losses) and disposal of non-current assets,
changes in fair value of financial instruments, exchange
differences, impairment losses, share-based compensation,
gains/(losses) on disposal of financial instruments and other
non-recurring costs/income.
Adjusted Operational EBITDA, as defined by the Company, is
EBITDA adjusted for the exclusion of transaction related expenses
and the amortisation of intangible assets related to acquisitions,
which the Directors believe are non-recurring.
The Group defines Adjusted Operating Profit as Operating Loss
adjusted for the exclusion of transaction related expenses and the
amortisation of intangible assets related to acquisitions, which
the Directors believe are non-recurring.
The Group defines Gross Profit as revenue net of third party
costs, including pass-through costs to clients such as media spend,
expenses incurred in shooting films, materials purchased for
specific installation projects, external line production companies
used when capacity is exceeded, and commissions.
EBITDA-based and Gross Profit-based measures and the related
ratios are used by management as indicators of the Group's
operating performance. The Company is not presenting EBITDA-based
or Gross Profit-based measures as measures of the Group's results
of operations. EBITDA-based and Gross Profit- based measures have
important limitations as an analytical tool, and should not be
considered in isolation or as substitutes for analysis of the
Group's results of operations.
Some of these limitations are:
-- EBITDA-based measures do not reflect the impact of
significant interest expense or the cash requirements necessary to
service interest or principal payments in respect of any
borrowings, which could further increase if the Group incurs more
debt.
-- EBITDA-based measures do not reflect the impact of income tax
expense on the operating performance of the Group.
-- EBITDA-based measures do not reflect the impact of
depreciation of assets on the performance of the Group.
-- EBITDA-based measures remove the impact of certain
non-recurring items from the performance of the Group.
The assets of the businesses of the Group that are being
depreciated will have to be replaced in the future and such
depreciation expense may approximate the cost to replace these
assets in the future. By excluding this expense from EBITDA-based
measures, these measures do not reflect the future cash
requirements of the Group for these replacements.
EBITDA and other non-IFRS measures should not be considered in
isolation or as an alternative to profit from operations, cash flow
from operating activities or other financial measures of the
Group's results of operations or liquidity derived in accordance
with IFRS. They have not been prepared in accordance with IFRS or
the accounting standard of any other jurisdiction. The Company has
included EBITDA, Gross Profit and other non-IFRS measures in this
announcement, because it believes that they are useful measures of
the Group's performance and liquidity. Other companies, including
those in the Group's industry, may calculate similarly titled
financial measures in a manner different to that of the Group.
Because all companies do not calculate these financial measures in
the same manner, the presentation of such financial measures in
this announcement may not be comparable to other similarly titled
measures of other companies. Neither EBITDA nor Adjusted
Operational EBITDA is audited.
The Directors consider Adjusted Operational EBITDA and Adjusted
Operating Profit to be a useful supplemental tool to assist in
evaluating operating performance because it eliminates items
related to depreciation, amortisation and exceptional items. As
there are no generally accepted accounting principles governing the
calculation of non-IFRS measures, other companies may calculate
such financial data or operating measures differently or may use
such financial data and operating measures for different purposes
than the Group does, and such financial data and operating measures
should therefore not be used to compare the Group against another
company. Prospective investors should not consider such financial
data or operating measures in isolation, as a substitute for or
superior to financial information prepared in accordance with IFRS
or as an indication of operating performance. The Directors report
Adjusted Operating Profit in the financial statements of the
Group.
Firewood Group historical financial information
The historical financial information of the Firewood Group has
been prepared in accordance with US GAAP. There are material
differences between US GAAP and IFRS as adopted by the European
Union. Accordingly, the historical financial information of the
Firewood Group should not be considered in isolation. Any unaudited
pro forma financial information in this announcement contains
certain adjustments to present the historical information relating
to the Firewood Group in a manner consistent with that of the
Group.
Furthermore, this announcement contains audited financial
information for the Firewood Group for the financial year ended 31
December 2018 and unaudited financial information drawn from
management accounts for the Firewood Group for the financial year
ended 31 December 2017. The unaudited financial information for the
financial year ended 31 December 2017 may not contain certain
adjustments which could be deemed necessary to present the
unaudited historical information in a manner that is entirely
consistent with the audited financial information for the financial
year ended 31 December 2018. However, the Directors believe that
any such adjustments would not be material in the context of the
Firewood Merger or the Group following the Firewood Merger and that
the presentation of such unaudited financial information is useful
in presenting the historical financial performance of the Firewood
Group.
EBITDA, as presented in connection to the Firewood Group, is
defined as profit or loss for the year before net finance costs,
income taxes and depreciation and amortisation.
Adjusted EBITDA, as presented in connection to the Firewood
Group is defined as EBITDA adjusted for non- recurring or
exceptional items.
Information to Distributors
Solely for the purposes of the product governance requirements
contained within: (a) EU Directive 2014/65/EU on markets in
financial instruments, as amended ("MiFID II"); (b) Articles 9 and
10 of Commission Delegated Directive (EU) 2017/593 supplementing
MiFID II; and (c) local implementing measures (together, the "MiFID
II Product Governance Requirements"), and disclaiming all and any
liability, whether arising in tort, contract or otherwise, which
any "manufacturer" (for the purposes of the MiFID II Product
Governance Requirements) may otherwise have with respect thereto,
the New Ordinary Shares have been subject to a product approval
process, which has determined that the New Ordinary Shares are: (i)
compatible with an end target market of retail investors and
investors who meet the criteria of professional clients and
eligible counterparties, each as defined in MiFID II; and (ii)
eligible for distribution through all distribution channels as are
permitted by MiFID II (the "Target Market Assessment").
Notwithstanding the Target Market Assessment, distributors should
note that: the price of the New Ordinary Shares may decline and
investors could lose all or part of their investment; the New
Ordinary Shares offer no guaranteed income and no capital
protection; and an investment in the New Ordinary Shares is
compatible only with investors who do not need a guaranteed income
or capital protection, who (either alone or in conjunction with an
appropriate financial or other adviser) are capable of evaluating
the merits and risks of such an investment and who have sufficient
resources to be able to bear any losses that may result therefrom.
The Target Market Assessment is without prejudice to the
requirements of any contractual, legal or regulatory selling
restrictions in relation to the Placing. Furthermore, it is noted
that, notwithstanding the Target Market Assessment, each of Dowgate
and HSBC has only procured investors who meet the criteria of
professional clients and eligible counterparties.
For the avoidance of doubt, the Target Market Assessment does
not constitute: (a) an assessment of suitability or appropriateness
for the purposes of MiFID II; or (b) a recommendation to any
investor or group of investors to invest in, or purchase, or take
any other action whatsoever with respect to the New Ordinary
Shares.
Each distributor is responsible for undertaking its own target
market assessment in respect of the New Ordinary Shares and
determining appropriate distribution channels.
Definitions
The following definitions apply throughout this Announcement,
unless the context requires otherwise:
Admission the admission of the New Ordinary Shares to
the standard segment of the Official List and
to trading on the London Stock Exchange's Main
Market for listed securities;
Application Form application form which accompanies the Prospectus
for Qualifying non-CREST Shareowners for use
in connection with the Open Offer;
----------------------------------------------------------
B Share the "B" ordinary share of GBP1.00 in the capital
of the Company;
----------------------------------------------------------
Circular the circular of the Company dated on or about
the date of this Announcement including a notice
to convene the General Meeting;
----------------------------------------------------------
Closing Price the closing, mid-market price of an Existing
Ordinary Share on 7 October 2019 (the last business
day prior to the announcement of the Issue)
as published by the London Stock Exchange;
----------------------------------------------------------
Company or S(4) S(4) Capital plc, a public company limited by
Capital shares incorporated in England and Wales with
registered number 10476913;
----------------------------------------------------------
Consideration the issue of 1,428,571 New Ordinary Shares pursuant
Issue to the Merger Agreement;
----------------------------------------------------------
Consideration the new Ordinary Shares issued in the Consideration
Shares Issue;
----------------------------------------------------------
CREST the relevant system (as defined in CREST Regulations)
for the paperless settlement of share transfers
and the holding of shares in uncertificated
form which is administered by Euroclear;
----------------------------------------------------------
CREST Regulations the UK Uncertificated Securities Regulations
2001 (as amended) including any modification
or re-enactment thereof for the time being in
force and such other regulations as are applicable
to Euroclear and/or CREST;
----------------------------------------------------------
Directors or Board the board of directors of the Company comprised
of Sir Martin Sorrell, Scott Spirit, Victor
Knaap, Wesley ter Haar, Peter Kim, Christopher
Martin, Peter Rademaker, Rupert Faure Walker,
Paul Roy, Sue Prevezer, Daniel Pinto and Elizabeth
Buchanan;
----------------------------------------------------------
Dowgate Dowgate Capital Limited, Joint Broker and Joint
Bookrunner for the Company;
----------------------------------------------------------
EU or European an economic and political confederation of European
Union nations which share a common foreign and security
policy and co-operate on justice and home affairs;
----------------------------------------------------------
Euroclear Euroclear UK & Ireland Limited, the operator
of CREST;
----------------------------------------------------------
Excluded Overseas (other than as agreed in writing by the Company
Shareowners and as permitted by applicable law) Shareowners
who are resident or otherwise located in any
Excluded Territory;
----------------------------------------------------------
Excluded Territories Australia, Canada, Guernsey, Japan, Jersey,
Hong Kong Special Administrative Region of the
People's Republic of China, the Republic of
Ireland, Switzerland and the United States or
territories for which the distribution of this
Document and any accompanying documents or the
making of the offer to subscribe for New Ordinary
Shares pursuant to the Issue may constitute
a violation of relevant securities laws and
"Excluded Territory" shall mean any of them;
----------------------------------------------------------
Existing Ordinary the 365,068,524 Ordinary Shares in issue as
Shares at the date of this Document;
----------------------------------------------------------
FCA the Financial Conduct Authority of the United
Kingdom or any successor body;
----------------------------------------------------------
Firewood Firewood Marketing, Inc. an S Corporation registered
in the USA with file number C3430605;
----------------------------------------------------------
Firewood Common the issued and outstanding shares of common
Stock stock, no par value per share, of Firewood;
----------------------------------------------------------
Firewood Equityowners the holders of Firewood Common Stock (other
than the Firewood ESOP);
----------------------------------------------------------
Firewood Lock-in the lock-in deeds entered into between each
Deeds of the Firewood Equityowners and the Company,
HSBC and Dowgate;
----------------------------------------------------------
Firewood ESOP the Firewood stock ownership trust;
----------------------------------------------------------
Firewood Merger the merger between Firewood and the Group pursuant
to the Merger Agreement;
----------------------------------------------------------
Firm Placee any person who has agreed to subscribe for Firm
Placed Shares pursuant to the Firm Placing;
----------------------------------------------------------
Firm Placed Shares The 36,506,852 New Ordinary Shares which the
Company is proposing to issue pursuant to the
Firm Placing;
----------------------------------------------------------
Firm Placing the subscription by the Firm Placees for the
Firm Placed Shares;
----------------------------------------------------------
Form of Proxy the form of proxy enclosed with the Circular
for use in connection with the General Meeting;
----------------------------------------------------------
FSMA the Financial Services and Markets Act 2000,
as amended, modified or supplemented from time
to time;
----------------------------------------------------------
General Meeting the general meeting of the Company convened
by the Notice of General Meeting, to be held
at the offices of Travers Smith LLP, 10 Snow
Hill, London EC1A 2AL at 11.00 am on 24 October
2019;
----------------------------------------------------------
Google Google Inc.;
----------------------------------------------------------
Google Partners Google, Google LLC and other Google related
parties covered by the Google ISA or separate
relationships with the Group;
----------------------------------------------------------
Group the Company and its subsidiaries from time to
time;
----------------------------------------------------------
HSBC HSBC Bank plc, Joint Broker, Joint Bookrunner
and principal bankers to the Company;
----------------------------------------------------------
IFRS the International Financial Reporting Standards,
as adopted by the European Union;
----------------------------------------------------------
IMA IMAgency Holding B.V. and its subsidiaries from
time to time;
----------------------------------------------------------
IMA Merger the merger with IMAgency Holding B.V. by MediaMonks
pursuant to the IMA Merger Agreement;
----------------------------------------------------------
IMA Merger Agreement the share sale and purchase agreement dated
9 August 2019 relating to IMAgency Holding B.V.;
----------------------------------------------------------
Issue the Firm Placing and Placing and Open Offer;
----------------------------------------------------------
Issue Price 142 pence per New Ordinary Share;
----------------------------------------------------------
Issue Resolution the Resolution numbered 1 in the Notice of General
Meeting;
----------------------------------------------------------
Joint Bookrunners HSBC and Dowgate;
----------------------------------------------------------
Listing Rules the Listing Rules made by the FCA under Part
VI of the FSMA;
----------------------------------------------------------
Londong Stock London Stock Exchange plc;
Exchange
----------------------------------------------------------
MAR Regulation (EU) 596/2014 of the European Parliament
and of the Council of 16 April 2014 on market
abuse;
----------------------------------------------------------
MediaMonks the business owned and operated by the MediaMonks
Group;
----------------------------------------------------------
MediaMonks Group MediaMonks Multimedia Holding B.V. and its subsidiaries
from time to time;
----------------------------------------------------------
Member State a member of the EEA;
----------------------------------------------------------
MergeCo Firefly MergeCo, Inc., a corporation with limited
liability incorporated and registered in Delaware,
having its registered office at 850 New Burton
Road, Suite 201, Dover, Delaware 19904 USA and
with file number 7634014;
----------------------------------------------------------
Merger Agreement the merger agreement dated 7 October 2019 pursuant
to which Firewood will, upon Admission, merge
with and into MergeCo;
----------------------------------------------------------
MightyHive MightyHive, Inc.;
----------------------------------------------------------
MiFID II EU Directive 2014/65/EU on markets in financial
instruments, as amended;
----------------------------------------------------------
MiFID II Product Articles 9 and 10 of Commission Delegated Directive
Governance Requirements (EU) 2017/593 supplementing MiFID II, as well
as local implementing measures;
----------------------------------------------------------
New Ordinary Shares the 70,422,535 new Ordinary Shares to be allotted
and issued pursuant to the Issue and the 41,428,571
new Ordinary Shares to be issued pursuant to
the Consideration Issue;
----------------------------------------------------------
Notice of General the notice convening the General Meeting set
Meeting out at the end of the Circular;
----------------------------------------------------------
Official List the Official List of the FCA;
----------------------------------------------------------
Open Offer the conditional invitation to Qualifying Shareowners
to apply for the Open Offer Shares at the Issue
Price on a pre-emptive basis;
----------------------------------------------------------
Open Offer Entitlement the pro rata entitlement to subscribe for Open
Offer Shares allocated to a Qualifying Shareowner
pursuant to the Open Offer;
----------------------------------------------------------
Open Offer Shares the 33,915,683 New Ordinary Shares for which
Qualifying Shareowners are being invited to
apply at the Issue Price to be issued pursuant
to the terms of the Open Offer;
----------------------------------------------------------
Ordinary Shares the ordinary shares of the Company, having a
nominal value of GBP0.25;
----------------------------------------------------------
Oro en Fools Oro en Fools B.V., which is the joint personal
holding company of Victor Knaap and Wesley ter
Haar;
----------------------------------------------------------
Overseas Shareowners Shareowners who are resident in, ordinarily
resident in, located in or citizens of, jurisdictions
outside the UK;
----------------------------------------------------------
Placing the conditional placing by HSBC and Dowgate
of the Placing Shares, subject to clawback pursuant
to the Open Offer, on behalf of the Company
on the terms and subject to the conditions contained
in the Placing Agreement;
----------------------------------------------------------
Placing Agreement the Placing Agreement dated 8 October 2019 in
relation to the Issue made between HSBC, Dowgate
and the Company;
----------------------------------------------------------
Placing Shares the 33,915,683 New Ordinary Shares to be conditionally
placed with institutional and certain other
investors pursuant to the terms of the Placing;
----------------------------------------------------------
Placee any person who has agreed to subscribe for Placing
Shares pursuant to the Placing;
----------------------------------------------------------
Prospectus the Prospectus of the Company dated on or about
the date of this Announcement;
----------------------------------------------------------
Qualifying CREST Qualifying Shareowners holding Ordinary Shares
Shareowners in uncertificated form;
----------------------------------------------------------
Qualifying non-CREST Qualifying Shareowners holding Ordinary Shares
Shareowners in certificated form;
----------------------------------------------------------
Qualifying Shareowners holders of Ordinary Shares (other than Excluded
Overseas Shareowners) on the Company's register
of members on the Record Date;
----------------------------------------------------------
Record Date the record date for the Open Offer, being close
of business on 7 October 2019;
----------------------------------------------------------
Regulation S Regulation S under the US Securities Act;
----------------------------------------------------------
Regulatory Information a service provided by the London Stock Exchange
Service for the distribution to the public of announcements
and included within the list maintained at the
London Stock Exchange's website;
----------------------------------------------------------
Resolutions the resolutions to be proposed at the General
Meeting, as set out in the Notice of General
Meeting included with the Circular;
----------------------------------------------------------
S(4) Firm Placees Sir Martin Sorrell, Scott Spirit, Peter Rademaker,
Rupert Faure Walker, Paul Roy (through an intermediary),
Sue Prevezer and Daniel Pinto, each of whom
have agreed to subscribe for New Ordinary Shares
pursuant to the Firm Placing;
----------------------------------------------------------
S(4) Limited S(4) Capital 2 Limited (formerly S(4) Capital
Limited), a private company limited by shares
incorporated in Jersey with registered number
126474;
----------------------------------------------------------
S(4) Placees Sir Martin Sorrell, Scott Spirit, Oro en Fools,
Peter Rademaker, Rupert Faure Walker, Sue Prevezer
and Daniel Pinto, each of whom have agreed to
subscribe for New Ordinary Shares pursuant to
the Placing;
----------------------------------------------------------
Shareowner a holder of Ordinary Shares;
----------------------------------------------------------
Standard Listing a standard listing under Chapter 14 of the Listing
Rules;
----------------------------------------------------------
Stanhope SEF4 Investment SCSp, acting by its General
Partner, Portman Square General Partner S.à
r.l.;
----------------------------------------------------------
UK or United Kingdom the United Kingdom of Great Britain and Northern
Ireland;
----------------------------------------------------------
Uncertificated recorded on the register of Ordinary Shares
or in uncertificated as being held in uncertificated form in CREST,
form entitlement to which, by virtue of the CREST
Regulations, may be transferred by of CREST;
----------------------------------------------------------
United States has the meaning given to the term "United States"
or US in Regulation S;
----------------------------------------------------------
US Securities the US Securities Act of 1933, as amended;
Act
----------------------------------------------------------
Glossary of Technical Terms:
FANG Facebook, Amazon, Netflix and Google
Programmatic buying digital advertising space automatically,
with algorithms informed by data determining
which advertising spaces to buy, how much to
pay for them, and which ads to deliver in the
acquired space;
---------------------------------------------------
ROI return on investment, specifically sales generated
by advertising spend;
---------------------------------------------------
Transcreation 'translating' original text from one language
to another while also 'recreating' the original
text to make sure it is still appropriate in
the context of the new audience and language;
---------------------------------------------------
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
ACQLIFVSIFLTIIA
(END) Dow Jones Newswires
October 08, 2019 02:00 ET (06:00 GMT)
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