TIDM7DIG
RNS Number : 5352I
7digital Group PLC
20 June 2017
20(th) June 2017
7digital Group plc
("7digital" or "the Company")
Acquisition of 24-7 for GBP2.2m in stock and cash
including major new contracts with total value of GBP18m
and acquired balance sheet cash of GBP1.1m
-- Acquisition of significant European competitor 24-7 Entertainment ("24-7") for GBP2.2m from MediaMarktSaturn ("MMS") through the issue of 23,144,616 new Ordinary Shares and GBP0.9m of cash in respect of funds held on the 24-7 balance sheet
-- Transaction expected to add approximately GBP5m to 7digital
revenues in 2017 and more than GBP8m in 2018
-- MMS, Europe's largest electronics and entertainment retailer,
becomes largest shareholder in 7digital and a new customer
with;
o a three year contract for existing "Juke!" services totaling
GBP11m; and
o a new contract for development of future services worth
GBP6m
-- New customer contracts from acquisition, other than those
with MMS, with contracted revenues of GBP1m and total annualised
value of GBP2.7m
-- Acquisition expected to be significantly earnings enhancing in 2018
Further to its announcements of 10 March 2017 and 6 June 2017,
7digital (AIM:7DIG) is pleased to announce that it has agreed to
acquire the business of 24-7, a significant European competitor and
B2B provider of digital music services, headquartered in Copenhagen
(the "Acquisition"). The Acquisition is expected to complete on 21
June 2017.
7digital has agreed to acquire 100 per cent of 24-7
Entertainment ApS, together with certain other assets from MMS,
Europe's largest retailer of consumer electronics, which, via its
brands MediaMarkt, Saturn and Redcoon operates in 15 European
countries and has approximately 6 million customer contacts every
day. 24-7 is the technical backend and catalogue provider for
digital music service, Juke!, that MMS delivers to customers in
selected countries.
As part of the Acquisition, MMS will become one of 7digital's
largest customers with a range of existing and new services and
will also become its largest shareholder. Three year contracts
totalling GBP11m have been agreed for existing services. A new
contract to the value of GBP6m over its lifetime, including an
initial set up fee of GBP1.4m, has also been agreed with MMS to
develop several new digital music services. Under the terms of the
Acquisition, a proportion of these revenues are expected to be paid
to 7digital within 14 days of completion, further strengthening the
Company's balance sheet.
24-7 has other significant customers, including Danish telecom
operator TDC, which together account for anticipated annual
revenues of GBP2.7m.
MMS is the largest 'bricks and mortar' retailer of packaged
music in Europe and is therefore a significant influence as the
music industry transitions to a digital streaming future. In its
recent report on the industry, PWC estimated that revenues from
streaming would become the largest source of global recorded music
sales in 2017, rising 37 per cent. to $9.1 billion ["Global
Entertainment & Media Outlook 2017-2021", PWC, Ovum]. The
digital strategies of major retailers like MMS will strongly
influence this transition.
The business being acquired, which comprises 24-7 Entertainment
ApS and certain associated assets and contracts, does not produce
consolidated standalone audited financial information. On the basis
of due diligence undertaken and the detailed review of certain
management accounts, the Company estimates that the Acquisition
will increase 7digital licensing revenue in 2017 by approximately
GBP5m and more than GBP8m in 2018. The Company expects that the
Acquisition will be earnings enhancing in 2018 and the Directors
expect that the Company, as enlarged by the Acquisition, will be
both profitable and cash generative in 2018. At 31 May 2017, it is
estimated that 24-7 had net assets of approximately GBP1m including
GBP1.1m of cash.
The total consideration of GBP2.2m will be satisfied by the
issue of 23,144,616 new Ordinary Shares to MMS. In addition,
7digital has agreed to pay an initial cash payment of GBP0.9m in
respect of the cash which remains on the balance sheet of 24-7. A
balancing cash sum will be received, or paid, by the Company within
three months of the Acquisition in relation to the final audited
net assets of 24-7 Entertainment ApS at 31 May 2017.
Application has been made for the 23,144,616 new Ordinary Shares
to be admitted to trading on AIM ("Admission") and dealings are
expected to commence on 21 June 2017. The new Ordinary Shares will
rank pari passu with the Company's existing Ordinary Shares.
Completion of the Acquisition will take place on Admission.
Pursuant to Admission, MMS will hold a total of 23,144,616 Ordinary
Shares of the Company representing approximately 12.7 per cent. of
the total voting rights of the Company (as enlarged by the
Acquisition and Admission).
The total number of Ordinary Shares in issue following Admission
will be 183,011,298 of which 28,336 are held in Treasury.
Accordingly, the figure of 182,982,962 may be used by shareholders
as the denominator for the calculations by which they will
determine if they are required to notify their interest in, or a
change to their interest in the Company under the FCA's Disclosure
and Transparency Rules.
Simon Cole, Chief Executive of 7digital, said:
"We set out three years ago to create a profitable, globally
dominant player in what we believed would be a rapidly expanding
market for the technology and content needed to build streaming
music services. This transaction represents the culmination of that
strategy, completing our consolidation of European competitors -
following the Snowite acquisition last year - and transforming
7digital in terms of size, scale and profitability.
MediaMarktSaturn is of central importance to the European music
industry as it builds from a year in which the importance of
streaming to future revenues has been confirmed. For one of the
world's top retailers of music to make the statement MMS is making
by committing to this digital strategy sends an important signal
about broadening the digital services available to consumers.
For 7digital, the revenues will nearly double our licensing
revenues and confirm 2018 as a year of healthy profit and positive
cashflow."
Wolfgang Kirsch, COO MediaMarktSaturn Retail Group and CEO
MediaMarktSaturn Deutschland, said:
"As the number one music retailer in Europe, music streaming is
increasingly important for us. Being a shareholder of 7digital will
enable us to strengthen our digital entertainment service Juke! and
develop further business models for the growing music streaming
business."
Enquiries:
020 7099
7digital Group 7777
Simon Cole, Chief Executive
Matt Honey, Chief Financial Officer
Holly Ashmore, PR Manager
finnCap (nominated adviser and 020 7220
broker) 0500
Geoff Nash / Carl Holmes / Simon
Hicks - Corporate Finance
Mia Gardner - Corporate Broking
Weber Shandwick (financial PR
agency)
Nick Oborne - NOborne@webershandwick.com
Tom Jenkins - TJenkins@ webershandwick.com
020 7067
About 7digital (http://about.7digital.com) 0000
7digital is the global leader in end-to-end digital music
solutions. The core of its business is the provision of robust and
scalable technical infrastructure and extensive global music rights
used to create music streaming and radio services for a diverse
range of customers - including consumer brands, mobile carriers,
broadcasters, automotive systems, record labels and retailers.
7digital also offers radio production and music curation services,
editorial strategy and content management expertise.
7digital fosters industry growth and innovation by simplifying
access to music for clients such as Onkyo, Global Radio and
musical.ly. From years of being the largest independent producer of
programming for the BBC, launching Radioplayer in multiple
territories, and powering services for partners like HMV, Electric
Jukebox and Panasonic, 7digital is perfectly positioned to lead
innovation at the intersection of digital music and next-generation
radio services.
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014
This information is provided by RNS
The company news service from the London Stock Exchange
END
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