11th Nov 2005 07:00
11 November 2005 themutual.net plc Acquisition & Appointment of Director themutual.net plc ("TMN"), the online media owner specialising in direct emailmarketing and rewarded shopping portals, is pleased to announce the acquisitionof the entire issued share capital of Electronic Direct Response plc ("EDR"),the email marketing company (the "Acquisition", creating the "Enlarged Group"),for an initial consideration of ‚£2.0 million in cash and the issue of 7,843,137new ordinary shares of 0.01p each in TMN ("Initial Consideration Shares").Highlights * Creating one of the largest online direct marketing specialists in the UK * Operating in the rapidly growing online advertising market * Core services include email sales, advertising planning and buying and delivery solutions * Access to over 6.5 million email addresses * More than 500 advertising clients * Increased strength and depth of management * Earnings enhancing Mark Smith, CEO, said,"The Acquisition allows us to operate at an entirely new level, offering a fullservice solution to our clients and with increased market share in an excitingand expanding market place, creating one of the UK's largest online directmarketing specialists. It is expected that the Acquisition will be earnings pershare enhancing in the first year following the completion of the Acquisition.The two companies bring together hundreds of clients, increased cross-promotionand sales opportunities and an expanded suite of online advertising productsand services. We look to the future with great enthusiasm."The initial payment of ‚£2 million will be funded from existing cash resources.In addition to the initial cash payment and Initial Consideration Shares, thetotal consideration includes deferred consideration of ‚£0.6 million ("DeferredConsideration"), payable in cash in three equal instalments of ‚£200,000 each on31 May 2006, 31 May 2007 and 31 May 2008. There is also further deferredconsideration, contingent on the future profitability of the Enlarged Group("Contingent Consideration"), of up to ‚£0.1 million in cash and up to 1,960,785shares in TMN ("Contingent Shares"). The Contingent Consideration is dependenton the future profitability of the Enlarged Group for the years ended 30 April2007 and 30 April 2008 and is payable following publication of the EnlargedGroup's audited annual accounts.TMN is also granting options exercisable at nominal value ("Options") to keyEDR staff amounting to 196,078 Shares on 31 May 2006 and up to a further980,392 Shares dependent on the profitability of the Enlarged Group for theyears ended 30 April 2007 and 30 April 2008.Assuming full issue of the Contingent Shares and full exercise of the Options,the EDR vendors will own approximately 19.0 per cent. of the share capital ofTMN and the Option holders will own approximately 2.3 per cent. of the sharecapital of TMN.Completion of the Acquisition ("Completion") is conditional upon there-registration of EDR as a private limited company and the admission totrading on AIM of the Initial Consideration Shares. Application for theadmission of the Initial Consideration Shares has been applied for and isexpected to take place on 14 November 2005 (provided that the re-registrationoccurs today as expected).James Morris, the founder of and largest shareholder in EDR who beneficiallyowns 45 per cent. of EDR's share capital, has agreed not to dispose of hisInitial Consideration Shares in TMN for a period of at least six monthsfollowing Completion and all EDR shareholders with holdings in excess of 1 percent. have agreed to an orderly market provision for a period of at least 12months following Completion. James Morris has also been appointed to the Boardof TMN effective from Completion. Further information regarding James Morrisand his service agreement is included below.For the year ended 31 March 2005 EDR reported turnover of ‚£3.4 million, grossprofit of ‚£1.1 million and profits before tax of ‚£34,000. For the 6 monthperiod ended 30 September 2005, un-audited management accounts showed turnoverof ‚£2.9 million, gross profit of ‚£0.9 million and profits before tax of ‚£288,000.On Completion EDR is expected to have net assets of at least ‚£0.4 million withnot less than ‚£0.4 million in cash. Any shortfall below this amount willresults in a corresponding equal adjustment to the initial cash consideration.EDR was established in 2000 to offer full services in email broadcast, salesand delivery. Acting as a sales house and marketing agency for a number ofestablished clients, the business also has access to over 5 million namesacross its managed and owned databases.The Enlarged Group now has access to in excess of 6.5 million email addressesand offers a complete range of high quality online marketing services to itsbase of over 500 clients. Core services include email sales for the owneddatabases, planning and buying for email based advertisers, delivery solutionsand further focus on the reward programmes, which continue to grow apace, asthe largest online reward sites in the UK.With the strengthened management, technology and resource at the company'sdisposal, the Enlarged Group intends to capitalise on its position as one ofthe largest email marketing specialists in the UK by providing a completesolution for all online marketeers and continue to exploit opportunities in therapidly growing online advertising market.James Morris has agreed to act as an executive director of TMN pursuant to aservice agreement to be entered into on Completion. Under this serviceagreement, he will be required to work full time until 31 December 2005 on abasic salary of ‚£100,000 per annum. From 1 January 2006 to 31 March 2006 hewill be on sabbatical during which time he will receive a basic salary of ‚£50,000 per annum. Thereafter, James will be required to work an equivalent of80 business days per annum, subject to holiday entitlement, for a basic salaryof ‚£40,000 per annum. The service agreement may be terminated by either partygiving 6 months' written notice.The following information is given in respect of the appointment of JamesMorris as a director of TMN (with effect from Completion), as required bySchedule 2 paragraph (g) of the AIM Rules:Full name:James Alexander MorrisAge:36Current Directorships:Electronic Direct Response PlcMimo Enterprises LtdPrevious Directorships:NoneNo further disclosures are required in relation to James Morris under Schedule2 paragraph (g) of the AIM rulesContacts:themutual.net plcMark Smith, Chief ExecutiveTel: 020 7440 9310ENDthemutual.net PLCRelated Shares:
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