Acquisition of Fredhopper and Firm Placing

30 January 2017

ATTRAQT Group plc

("ATTRAQT", the "Group" or the "Company")

Acquisition of Fredhopper

Firm Placing to raise £27.5 million

Open Offer to raise up to £1.0 million

Suspension of trading

ATTRAQT Group plc (AIM: ATQT), a leading provider of visual merchandising, eCommerce site search and personalised recommendation technology, is pleased to announce that it has entered into a conditional agreement to acquire the entire issued share capital of Fredhopper BV ("Fredhopper") (the "Acquisition").

At the same time, ATTRAQT also announces a conditional Firm Placing and Open Offer to raise up to £28.5 million (before expenses). The Firm Placing which has been arranged by N+1 Singer, acting as the Company's nominated adviser and broker, will raise £27.5 million (before expenses) (the "Firm Placing"). The Firm Placing was significantly oversubscribed with new and Existing Shareholders. The Company is seeking to raise up to an additional £1 million by way of an Open Offer to Existing Shareholders (but not those who have taken part in the Firm Placing).

The net proceeds of the Firm Placing and Open Offer will be used primarily to fund the Acquisition.

Highlights

Acquisition of Fredhopper

· Fredhopper is a cloud-based provider of onsite search, navigation, recommendation and visual merchandising solutions through a global SaaS platform;

· Fredhopper has a large recurring revenue base which accounted for 90% of total revenues in FY16;

· Considerable number of long-standing key customer relationships of which the top eight have grown by 58% per annum between FY14 and FY16, most notable amongst these is ASOS which has been a key contributor to the growth of the Fredhopper business;

· Transformational opportunity which brings critical mass to ATTRAQT - the Enlarged Group will have a strong presence in the UK, US and Continental Europe with approximately 250 clients;

· The Directors believe that apart from Fredhopper and ATTRAQT, no other competitor provides all three of the following technologies: site search; visual merchandising; and product recommendation in one integrated platform - the Directors believe it will create the 'go to' provider of online visual merchandising;

· Fredhopper is currently a division of SDL plc;

· Total consideration of £25 million (debt and cash free, zero net working capital); and

· Acquisition constitutes a reverse takeover that will be subject to approval by Existing Shareholders.

Oversubscribed Firm Placing and Open Offer

· Firm Placing and Open Offer to raise gross proceeds of up to £28.5 million at an issue price of 35 pence per ordinary share;

· Firm Placing of 78,572,000 ordinary shares at the Issue Price;

· Open Offer to Existing Shareholders (but not those who have taken part in the Firm Placing) to raise up to approximately £1.0 million at the Issue Price; and

· Net proceeds to be used to fund the Acquisition with the balance to fund the integration of the two businesses, investment into sales and marketing, customer support and on-going product development and general working capital for the Enlarged Group.

Nick Habgood, Chairman, commented: "As independent companies, ATTRAQT and Fredhopper have each built strong reputations, delivering products that significantly improve conversion rates and increase sales for their 250 e-commerce retail customers. Bringing the two businesses together will allow us to accelerate investment in sales and marketing, customer support and in on-going product development. Increasing our presence in the important North America market is a particular focus. Our objective is to deliver strong profitable growth whilst becoming a global technology partner of choice to leading online retailers."

Reverse takeover, suspension of trading, General Meeting and Re-Admission

The Acquisition constitutes a reverse takeover pursuant to Rule 14 of the AIM Rules and as such is conditional, amongst other things, on approval by Shareholders which will be sought at a general meeting of the Company. Accordingly the Directors have requested that trading in the Company's shares on AIM be suspended with effect from 7:30 a.m. today pending the publication of an AIM admission document or confirmation that the Acquisition is not proceeding. It is not currently anticipated that trading in the Company's shares will resume prior to 7 March 2017.

The Directors currently envisage that a general meeting to approve the Acquisition, Placing and Open Offer will be held on 6 March 2017 at the offices of N+1 Singer, One Bartholomew Lane London EC2N 2AX and further announcements will be made at the appropriate time.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 ("MAR"). In addition, market soundings (as defined in MAR) were taken in respect of the Placing 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.

For further information, please contact:

About ATTRAQT

ATTRAQT launched its merchandising platform Freestyle Merchandising in 2009 which included product recommendations, site search and visual merchandising. The client base has now grown to over 120 clients, including Tesco Clothing (part of Tesco Plc (LSE: TSCO)), boohoo.com (LSE: BOO) and Superdry (LSE: SGP). The Company has market presence in Western Europe and the US with offices in London and Chicago. For more information please visit: http://attraqt.com/ 

Background to the Acquisition and strategic rationale

The Existing Group is a leading provider of e-commerce visual merchandising, site search and recommendation technology. Branded 'Freestyle Merchandising' and launched in 2009, the Existing Group's SaaS platform focuses on providing retailers with visual merchandising tools to give them much greater control over how their products are merchandised on their e-commerce sites. Freestyle Merchandising acts as an overlay to a retailer's e-commerce site and works to enhance the customer's experience as well as the sales performance of the site through superior site search, product recommendations and visual merchandising functionality. In essence, the Existing Group provides retailers with the necessary tools in order to merchandise more effectively. The Directors believe that the benefits for retailers include:

· increased conversion rates;

· greater productivity from the retailers' online visual merchandising teams;

· greater flexibility to respond to trends; and

· reduced reliance on internal IT to make changes.

Since Original Admission, the Company has focused on developing its client base, servicing over 120 clients with 134 live sites and 22 sites in production (156 sites in total). It has also aimed to reinvest its limited cash resources in organic growth by developing performance improvements and new features, such as Hypercaching performance technology and completing the migration of the entire platform to a managed cloud infrastructure. The Company has reported strong financial and operational progress on its stated objectives since Original Admission, and fully launched in the US in 2016. This is illustrated by the following key progress metrics since Original Admission:

· admitted to AIM in August 2014, raising £1.25 million;

· raised a further £3.3 million in December 2015 alongside a secondary placing of £2.6 million at which point Azini 3 LLP became a shareholder;

In the last three financial years the Existing Group has achieved the following:

· the client base has grown from 87 (FY14) to over 120 (FY16);

· revenue has grown from £2.1m (FY14) to £3.6m (FY16);

In the last two financial years the Existing Group has achieved the following:

· revenue from the Existing Group's US division has increased by 103% (FY15 to FY16);

· average order value has grown by 14% to £32.3k (FY15 to FY16); and

· the contracted exit rate has increased from £3.4m to £3.9m (FY15 to FY16).

 The Company operates a robust business model, based primarily on a recurring monthly service fee, with a one-off set-up fee and additional follow-on project fees. Clients typically sign for a minimum of 12 months, with larger clients typically signing for two years. The Board considers this to be a scalable model in the UK and in North America, a region which has been of particular focus for the Company in terms of development and expansion.

The Acquisition is expected to double the Existing Group's current client base to approximately 250 retailers, including some of the largest and best known online retailers such as ASOS and Waitrose. As such, the Directors believe that the Acquisition will provide significant scale to the business and represents a significant opportunity for the Enlarged Group to become the 'go to' provider for retailers in the UK, US and Continental Europe wanting e-commerce enhancing technologies. This is expected to have the following benefits:

· the Enlarged Group would be the only provider to offer all three technologies, namely: online visual merchandising; site search; and product recommendations;

· the commercial profile of the Enlarged Group would be raised, enhancing the sales pipeline;

· the value proposition of the Enlarged Group would be strengthened thereby maintaining upward pressure on client annual contract value; and

· enable increased investment in sales and marketing and in accelerating the Enlarged Group's new product development pipeline in order to drive sales.

The Directors believe that the Acquisition will result in significant value accretion for the Existing Group as it will be revenue and EBITDA enhancing to the Company. It is also expected to free up resource to enable investment in sales and marketing to accelerate the Company's development roadmap whilst at the same time releasing the latent potential of Fredhopper.

Information on Fredhopper

Fredhopper, which was acquired by SDL plc on 31 December 2009, has its primary office in Amsterdam in the Netherlands, with operations also in the UK and Bulgaria. It is a provider of a SaaS-delivered online merchandising platform to e-commerce retailers, primarily in the UK and Continental Europe.

Fredhopper's platform includes site search, visual merchandising and adaptive product recommendations and, as such, the Directors consider that Fredhopper is the Existing Group's most direct and comparable competitor. Fredhopper licences its platform to customers, typically annually or quarterly in advance, and charges a mixture of licence fees and one-off set up fees.

Fredhopper has a large recurring client base, accounting for 90 per cent. of total revenue for FY16, and a considerable number of long-standing key customer relationships of which the top eight have grown by 58 per cent. between FY14 and FY16. Most notable amongst these is ASOS which has been a key contributor to the growth of the Fredhopper business.

Selected historical financial information on Fredhopper

The table below sets out Fredhopper's summary financial information for each of the three years ended 31 December 2016:

*(Pre-exceptional items)

In the financial years ended 31 December 2014, 2015 and 2016, Fredhopper won 14, 12 and eight new clients respectively, with such new clients generating total revenue (presented on an annualised basis) and average revenue per new client (also on an annualised basis) as follows:

This information is pending finalisation of audit and therefore subject to change.

The summary information presented in this section relates to past performance. Past performance is not a reliable indication of future results.

Comparison of ATTRAQT and Fredhopper

The Directors believe that the following represents a useful initial high level comparison of the two businesses:

· sales - the sales process for ATTRAQT and Fredhopper are similar, with ATTRAQT having more of a focus on mid-tier retailers whilst Fredhopper a focus on large global retailers;

· marketing - both ATTRAQT and Fredhopper have a marketing function, with Fredhopper activity in early days;

· technology stack - Both companies offer the same three services - visual merchandising, product recommendations and site search. ATTRAQT have strengths in visual merchandising, product recommendations and user interface. Whilst Fredhopper's strengths are in site search and product recommendation;

· infrastructure - ATTRAQT supports Demandware, can be integrated with Javascript and also server-to-server. The platform performance is high and additionally offers reporting. Fredhopper can be integrated server-to-server, has cloud deployment and maintenance, but does not offer platform reporting; and

geographical territories - both ATTRAQT and Fredhopper have clients within the UK, whilst ATTRAQT have clients in the USA and Fredhopper in Continental Europe and APAC.

Current trading

The Company announced its unaudited preliminary results for the period to 30 December 2016 earlier today. These unaudited preliminary results contained a review of the period to 30 December 2016 together with details of any material events since the period end. Trading since 1 January 2017 has been in line with the Directors' expectations.

Strategy of the Enlarged Group

The Directors believe that the Acquisition represents a significant step-change for the Existing Group in terms of scale, with combined revenues for the year ended 31 December 2016 being £14.7m million (approximately four times the level of the Existing Group's revenues for the same period) and a significant increase in the customer base (from in excess of 120 to 250).

Plans for post-acquisition integration

Following Re-Admission, the Directors intend on integrating the sales and account management teams as soon as is practicable. However, the Directors are mindful of the need to ensure that the integration process is as effective and smooth as it can be and, most importantly, that it enables them to select the 'best of breed' from either business. In order to assist them in this process, the Directors have commissioned an independent technology review.

On a short to medium-term basis, the Directors currently anticipate that the integration plan will consist of the following key steps:

· integration of the sales and account management teams in order to secure and grow revenue from the existing client base - the Directors believe that the combination and centralisation of the sales and account management function of the Enlarged Group will avoid duplication and enable the enlarged team to be properly resourced to deliver growth, with a single view of the combined customer base;

· make additional investment in sales and marketing with a view to driving new client wins and revenue growth - while both companies have somewhat similar products, Fredhopper has tended to target the larger global retailers whereas ATTRAQT has been very successful with the mid-tier retailers. The Enlarged Group plans to make a corresponding investment to increase the size of both the US and European sales teams, with a blend of direct and indirect sales professionals supported by telemarketers in a lead-generation role;

· invest further in international expansion - the Directors believe that the two businesses have a large element of geographical synergies. Outside the UK, where both companies have a significant number of customers, ATTRAQT is making positive progress in the US market, while Fredhopper currently has a stronger presence in Continental Europe. By becoming the largest and most international player in the market, the Directors believe the Enlarged Group will be more attractive to larger international retailers, have more leverage with technology partners, system integrators and digital marketing agencies.

· continue to invest in the Enlarged Group's production capacity in order to grow revenue - the Directors plan to continue to invest in the Enlarged Group's technological resource for new site implementation primarily by hiring new additional production engineers and project managers and/or potentially utilising Fredhopper's Bulgarian development centre for the same purpose, whilst also continuing to invest in increasing production capacity through automation and standardisation of the production process;

· sharing technology between the two businesses will provide cross-selling opportunities - there are elements within respective technology stacks that are potentially transferable (e.g. Fredhopper's site search engine and ATTRAQT's product recommendation technology) therefore providing an cross-selling opportunity to both companies; and

· independent technology review - both businesses will be run side-by-side pending the conclusion of an independent technology review commissioned in order to establish the development roadmap and enable the selection of 'best of breed' moving forwards.

Future strategy

The Directors intend that in the short to medium term the Enlarged Group will establish itself as the visual merchandising platform of choice for online retailers.

In the medium term, the Enlarged Group aims to evolve into a leading provider of e-commerce enhancement technologies and to offer a portfolio of 'best of breed' solutions, delivered from a single cloud infrastructure, with one contract, one implementation and one point of contact for support. By doing this, the Directors believe that it will make the Enlarged Group's service offering more compelling to new customers and increase "stickiness" with existing customers.

The two companies have historically been innovative in developing and bringing new products and new features to market. The Directors believe that eliminating duplicated activities will enable investment in incremental sales and marketing, customer support and in on-going new product development.

The Firm Placing and Open Offer

Details of the Placing

The Company has conditionally raised £27.5 million before expenses through the Firm Placing of 78,572,000 Firm Placing Shares at the Issue Price to the Firm Placees.

The Firm Placing is conditional, inter alia, upon:

i. the passing of all of the Resolutions;

ii. the Firm Placing and Open Offer Agreement becoming or being declared unconditional in all respects and not having been terminated in accordance with its terms prior to Re-Admission; and

iii. Re-Admission becoming effective by no later than 8.00 a.m. on 7 March 2017 or such later time and/or date (being no later than 8.00 a.m. on 31 March 2017) as N+1 Singer and the Company may agree.

If any of the conditions are not satisfied, the Firm Placing Shares will not be issued and all monies received from the Firm Placees will be returned to them (at the Firm Placees' risk and without interest) as soon as possible thereafter.

The Firm Placing Shares are not subject to clawback.

The Firm Placing Shares (and the Offer Shares) will be issued free of all liens, charges and encumbrances and will, when issued and fully paid, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of their issue.

Application will be made to the London Stock Exchange for the Re-Admission of the Enlarged Issued Share Capital to trading on AIM. On the assumption that, inter alia, the Resolutions are passed, it is expected that Re-Admission will occur and that dealings will commence at 8.00 a.m. on 7 March 2017 at which time it is also expected that the Firm Placing Shares will be enabled for settlement in CREST.

Details of the Open Offer

The Company is proposing to raise up to approximately £1.0 million before expenses through the Open Offer and further announcements containing details of the Open Offer will be made at the appropriate time. It is currently expected that the Open Offer will be available to Existing Shareholders from 7 March 2017.

Firm Placing and Open Offer Agreement

Pursuant to the Firm Placing and Open Offer Agreement, N+1 Singer has agreed to use its reasonable endeavours as agent of the Company to procure subscribers for the Firm Placing Shares at the Issue Price.

The Firm Placing and Open Offer Agreement provides, inter alia, for payment by the Company to N+1 Singer of advisory and corporate finance fees together with commissions based on certain percentages related to the number of Firm Placing Shares placed by N+1 Singer multiplied by the Issue Price.

The Company will bear all other expenses of and incidental to the Firm Placing and Open Offer, including printing costs, Registrar's and Receiving Agent's fees, all legal and accounting fees of the Company and of N+1 Singer, all stamp duty and other taxes and duties where payable.

The Firm Placing and Open Offer Agreement contains certain warranties and indemnities from the Company in favour N+1 Singer and is conditional, inter alia, upon:

· Re-Admission becoming effective not later than 8.00 a.m. on 7 March 2017 or such later time and/or date as the Company and N+1 Singer may agree, being not later than 31 March 2017;

· the share purchase agreement with respect to the Acquisition not terminating or being terminated, in each case in accordance with its terms; and

· there being no a material breach by the Company of the Firm Placing and Open Offer Agreement.

N+1 Signer may terminate the Firm Placing and Open Offer Agreement in certain circumstances, if, inter alia, the Company is in material breach of the Firm Placing and Open Offer Agreement, if the Acquisition does not complete and/or if Re-Admission does not occur by no later than 31 March 2017.

Directors' dealings

Certain of the Directors are participating in the Firm Placing at the Issue Price as described below:

* Prior to the issue of the Offer Shares and assuming that no further Ordinary Shares are issued following the date of this Announcement

Azini 3 LLP, a private equity fund which is managed by Azini Capital Partners LLP, is an existing shareholder and is participating in the Firm Placing as set out below. Nick Habgood, Chairman of the Company, is the Managing Partner of Azini Capital Partners LLP.

Significant shareholders and related party transactions 

The following Shareholder holding, as at the date of this Announcement, directly or indirectly, 10 per cent. or more of the Existing Ordinary Shares is participating in the Firm Placing at the Issue Price:

* Prior to the issue of the Offer Shares and assuming that no further Ordinary Shares are issued following the date of this Announcement

The participation in the Firm Placing by Azini 3 LLP constitutes a related party transaction for the purposes of the AIM Rules. The independent directors (comprising those Directors unconnected to Azini 3 LLP being Ivor Dunbar, André Brown, Mark Johnson, Robert Fenner and Edward Ewing), having consulted with the Company's nominated adviser, N+1 Singer, consider that the terms of the related party transaction are fair and reasonable insofar as the Existing Shareholders are concerned.

General meeting

The Directors currently envisage that a general meeting to approve the Acquisition, Placing and Open Offer will be held on 6 March 2017 at the offices of N+1 Singer, One Bartholomew Lane London EC2N 2AX and further announcements and a notice of general meeting in connection with this will be issued at the appropriate time.

Irrevocable undertakings

The Directors and certain of the Company's key Existing Shareholders have given irrevocable undertakings to the Company to vote in favour of the Resolutions (and to procure that such action is taken by the relevant registered holders) in respect of their beneficial holdings totalling 21,033,023 Existing Ordinary Shares, representing approximately 78.07 per cent. of the Existing Share Capital.

Expected timetable of principal events

If any of the details contained in the timetable above should change, the revised times and dates will be notified by means of an announcement through a Regulatory Information Service.

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