Transaction accelerates Frankly's top-line
growth and adds over 100 million monthly active users
/NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO U.S.
NEWSWIRE SERVICES/
SAN FRANCISCO, CA, July 29, 2015 /CNW/ - Frankly Inc. (the
"Company" or "Frankly") (TSX-V: TLK) a next-generation chat
technology platform that brings dynamic conversation and direct
consumer engagement to mobile app experiences, today announced that
it has signed an agreement dated as of July
28, 2015 ("Purchase Agreement") to purchase the
outstanding units of Gannaway Web Holdings, LLC, d/b/a/ WorldNow
("Worldnow") for total consideration of US$45 million. The acquisition of Worldnow
will enable Frankly to provide mobile messaging and news content on
one platform, increasing its user engagement, traffic and
monetization. In addition, Frankly will be acquiring Worldnow's
content platform with more than 100 million monthly active users
(MAU) and 450 customers.
Worldnow powers one of the largest networks of local news
content on mobile and web in the United
States, according to comScore, Inc. It enables local
broadcasters and TV stations to connect to their viewers digitally
by helping them create websites, apps and other digital properties
used to distribute and manage online content, while providing a
leading edge advertising platform as part of its core
offering. Worldnow generates revenue through long-term
licensing agreements on its news platform as well as through
digital advertising. Worldnow's revenue and EBITDA has grown
steadily in the past five years, reporting US$26 million in revenue and US$6.5 million in EBITDA in 2014.
"Frankly's acquisition of Worldnow enables us to combine two of
the most powerful and proven engagement categories in mobile
today," said Steve Chung, Founder
and CEO of Frankly. "We will become a leading provider of mobile
messaging and news content on one integrated platform, creating
unique long-term growth and cross-selling opportunities. This
transaction provides immediate scale for our business, adding a
sizable user and customer base, an industry leading advertising
platform and a source of stable revenue and EBITDA."
"We are excited to begin the integration of our combined
technologies," said Lou Schwartz,
Chief Strategy Officer at Worldnow. "The Frankly and Worldnow joint
offering will enable us to better serve our combined customers in
media, sports, entertainment, retail, local news and mobile app
development. With a combined chat and content platform, our
customers have an industry leading engagement and monetization
solution that enables them to interact directly with their
consumers in real-time, allowing the content and brand owners to
become more relevant and increase mindshare on their own digital
properties."
Mr. Chung continued: "We are excited to welcome the
highly-talented Worldnow employees to the Frankly family. We look
forward to becoming the preeminent platform for content and
messaging."
Founded in 1998 by Gary Gannaway,
Worldnow has more than 90 employees working in its New York office. Worldnow is one of the
top 20 most visited news/information network of sites in
the United States (Source:
comScore, Inc.).
The Transaction
Pursuant to the Purchase Agreement, Frankly is to acquire 100%
of the outstanding membership units of Worldnow. Under the
terms of the Purchase Agreement, on the closing date, Frankly will
pay US$10 million in cash and
US$20 million in Class A restricted
voting shares of Frankly (the "Class A Shares") (the "Stock
Consideration") to the vendors of the interests in Worldnow, being
Gannaway Entertainment, Inc. ("GEI"), Raycom Media Inc. ("Raycom"),
Liberty TV Group, LLC ("Liberty") and two other individual minority
shareholders (with such individual shareholders to receive cash
only, and GEI, Raycom and Liberty to receive cash consideration and
the Stock Consideration) and will pay an additional US$15 million (the "Second Tranche") in cash on
the date that is one year from the closing date to GEI and
Raycom. The number of Class A Shares comprising the Stock
Consideration is 9,772,204 Class A Shares, determined with
reference to the volume-weighted average price of the common shares
of Frankly (the "Common Shares") on the TSX Venture Exchange
("TSX-V") for the five days prior to the date hereof (being
C$2.6471). The Second Tranche cash
consideration will be evidenced by promissory notes issued at
closing, bearing simple interest at a rate of 5% per annum.
All of the securities composing the Stock Consideration will
also be subject to a lock-up agreement. The lock-up period
with respect to securities representing 50% of the value of the
Stock Consideration will expire upon the first anniversary of the
closing date of the transaction; and the lock-up period with
respect to the remainder of the Stock Consideration will expire
upon the second anniversary of closing of the transaction.
The lock-up periods are subject to earlier expiry upon the
occurrence of certain events that constitute a "change of control"
of the Company. Upon expiry of the lock-up periods, the Class
A Shares will be converted into Common Shares.
Upon the closing of the transaction, it is expected that Raycom
will own 6,751,132 Class A Shares, convertible into the same number
of Common Shares, or 21.2% of the outstanding Common Shares. Mr.
Paul H. McTear, Jr., Chief Executive
Officer and a director of Raycom, is the person with authority to
make decisions with respect to these Common Shares on behalf of
Raycom.
Subject to TSX-V approval, in connection with, and upon the
closing of, the transaction, Frankly shall appoint Joseph G. Fiveash, III, Vice President, Digital
Media, Strategy and Business Development of Raycom, as a member of
Frankly's board of directors and Lou
Schwartz as President of the Media Division of
Frankly. Upon the appointment of Mr. Fiveash as a member of
Frankly's board of directors, Jung Woo
Sung will step down as a director of Frankly.
The Company further expects that upon completion of the
transaction, and subject to TSX-V approval, certain officers of
Worldnow will assume roles with Frankly or continue as officers of
the Worldnow business unit, and, as such, will be considered
"insiders" of Frankly for purposes of securities laws and the
policies of the TSX-V. It is expected that Ms. Inna Vartelsky will assume the position of
global controller, Mr. John Wilk
will assume the position of general counsel, and Mr. Craig Smith and Ms. Melissa Hatter will each assume positions
equivalent to senior vice presidents of the Worldnow business
unit.
Beacon Securities Limited is acting as financial advisor to
Frankly and Fasken Martineau DuMoulin LLP and Reed Smith LLP are
acting as Frankly's legal counsel.
The closing of the transaction remains subject to TSX-V approval
and, to the extent required by the TSX-V, approval of Frankly's
shareholders.
Summary Financial Information of Worldnow
Income Statement
Data (US$)
|
Year
Ended
2014
|
Total
Revenues
|
26,455,220
|
Total
Expenses
|
24,617,482
|
EBITDA
|
6,492,995
|
Net Income
|
1,837,738
|
|
|
Balance Sheet Data
(US$)
|
As at December
31,
2014
|
Total
Assets
|
17,726,209
|
Total
Liabilities
|
14,583,938
|
Incentive Payment
Subject to TSX-V approval, pursuant to a Management Services
Agreement dated April 1, 2015 between
Worldnow and Schwartz & Associates, PC ("Schwartz &
Associates") (the "Management Services Agreement"), Schwartz &
Associates is due the amount of US$1,125,000 in connection with, and upon the
closing of, the transaction (the "Incentive Fee"), US$400,000
of which the Company shall satisfy by granting Class A Shares to
Schwartz & Associates. The Class A Shares will be issued at a
price of C$2.6471 per Class A Share,
being the volume-weighted average price of the Common Shares on the
TSX-V for the five days prior to the date hereof.
Lou Schwartz is the principal of
Schwartz & Associates and is the Chief Strategy Officer of
Worldnow.
Credit Facility
In conjunction with the transaction and subject to TSX-V
approval, Frankly has obtained a commitment letter from JJR Private
Capital Limited Partnership ("JJR") for a credit facility of up to
US$10 million (the "Credit
Facility"). In consideration for and upon JJR entering into
the Credit Facility, Frankly has agreed to pay to JJR a commitment
fee in the amount of US$100,000 and
to issue to JJR 50,000 Common Shares, subject to TSX-V
approval. Advances under the Credit Facility will be in
multiples of US$1 million (each, an
"Advance") and will bear interest at ten percent (10%) per
annum. In connection with each Advance, Frankly is required
to (i) pay a drawdown fee to JJR equal to one percent (1%) of the
amount of the Advance, and (ii) issue to JJR warrants to purchase
Common Shares in an amount equal to ten percent (10%) of the amount
of the Advance at an exercise price equal to the weighted average
of the trading prices of the Common Shares for the ten (10) trading
days ending on the last trading date preceding the date of the
written drawdown request by Frankly (the "Warrants"), subject to
TSX-V approval. The Warrants shall be exercisable for three (3)
years from the date of issuance and shall provide for other
customary provisions.
Ronald D. Schmeichel is a
director of Frankly and principal of JJR. Accordingly, the
entering into of the Credit Facility would constitute a "related
party transaction" pursuant to Multilateral Instrument 61-101 –
Protection of Minority Securityholders in Special
Transactions ("MI 61-101"). Pursuant to MI 61-101, the
Credit Facility is not subject to the formal valuation requirements
and the transaction is also exempt from the minority approval
requirement, as neither the fair market value of the subject matter
of, nor the fair market value of the consideration for, the Credit
Facility, insofar as it involves interested parties, exceeds 25% of
Frankly's market capitalization.
About Frankly
The Company is a next generation "chat-as-a-service" technology
platform that brings dynamic conversation and direct consumer
engagement to mobile app experiences. The Company aims to
unlock the power of messaging for every platform by seamlessly
enabling access to conversations that matter most to individuals
and communities. Through the simple integration of our Chat
SDK, the Company's technology can be inserted into a website or
mobile application to provide a customizable version of the
Company's messaging technology. The Company is currently
working with many partners across several industries. The
Company also offers Frankly Chat, a free, mobile messaging
application for iOS and Android devices. Frankly Chat has
over 2 million downloads, and is focused on user privacy by
offering ephemeral messages with unsend capabilities.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Caution Regarding Forward Looking Information
This release includes forward-looking statements, including:
the expected completion date of the proposed transaction; the
integration of Worldnow into Frankly's business; the business plan
and strategies of Worldnow and Frankly; the combined company's
financial position and growth prospects; management of the combined
company; the anticipated tax treatment of the proposed combination
for Worldnow's shareholders; and Frankly's and Worldnow's
anticipated future results. Forward-looking statements are
typically identified by words such as "expect", "anticipate",
"believe", "foresee", "could", "estimate", "goal", "intend",
"plan", "seek", "strive", "will", "may" and "should" and similar
expressions. Forward-looking statements reflect current estimates,
beliefs and assumptions, which are based on Frankly's and
Worldnow's perception of historical trends, current conditions and
expected future developments, as well as other factors management
believes are appropriate in the circumstances. Frankly's and
Worldnow's estimates, beliefs and assumptions are inherently
subject to significant business, economic, competitive and other
uncertainties and contingencies regarding future events and as
such, are subject to change. Frankly and Worldnow can give no
assurance that such estimates, beliefs and assumptions will prove
to be correct.
Numerous risks and uncertainties could cause the combined
company's actual results to differ materially from the estimates,
beliefs and assumptions expressed or implied in the forward-looking
statements, including, but not limited to: failure to realize
anticipated results; failure to realize benefits from the combined
company's IT systems, including the combined company's IT systems
implementation, or unanticipated results from these initiatives;
the inability of the combined company's IT infrastructure to
support the requirements of the combined company's business;
heightened competition; and changes in economic conditions; damage
to the reputation of brands promoted by the combined company;
changes in the combined company's income, commodity, other tax and
regulatory liabilities including changes in tax laws.
There can be no assurance that the proposed combination will
occur or that the anticipated strategic benefits and operational,
competitive and cost synergies will be realized. The proposed
combination is subject approval by the TSX Venture Exchange and,
potentially, shareholders of Frankly, and the fulfillment of
certain conditions, and there can be no assurance that any such
approvals will be obtained and/or any such conditions will be
met.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect Frankly's and Worldnow's
expectations only as of the date of this News Release. Frankly and
Worldnow disclaim any obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
To learn more about Frankly, please visit www.frankly.com.
SOURCE Frankly Inc.