11th Aug 2008 07:30
Date: 11 August 2008
On behalf of: First Artist Corporation plc
For immediate release
FIRST ARTIST CORPORATION PLC
('First Artist' or 'the Company' or 'the Group')
Acquisition of Spot and Company of Manhattan, Inc
Suspension of Shares
Update on Dewynters Group
First Artist Corporation plc (AIM: FAN) the media, events and entertainment group, is delighted to announce that it has agreed the acquisition of Spot and Company of Manhattan, Inc ("SpotCo").
This transaction constitutes a reverse takeover under the AIM Rules. The Company expects its securities to be suspended by the LSE until such time that an admission document in respect of the enlarged entity is published.
The maximum consideration payable for SpotCo is US$18.86 million, to be satisfied in cash. The initial consideration comprises the payment of $5.5 million, which will be followed by three guaranteed payments of $1.5 million over the next three years. Deferred consideration will be also be payable over the next three years dependent on the achievement by SpotCo of certain financial performance targets.
SpotCo is a leading US-based live entertainment advertising agency and is a natural strategic fit with Dewynters Limited ("Dewynters") the Company's full-service agency which provides marketing, design, advertising, promotions, digital media services, publishing and merchandising to the UK entertainment industry, together with signage and front of house display expertise through its subsidiary, Newman Displays. Dewynters also has a merchandising operation in the US. Dewynters has pioneered a wealth of innovative campaigns including The Phantom of the Opera, Cats and Les Miserables, and more recently Mamma Mia!, The Lion King, We Will Rock You, Wicked, Joseph And His Amazing Technicolor Dreamcoat, The Sound of Music, The Lord of the Rings and Equus.
First Artist announced in July that it had ended discussions in respect of the potential disposal of Dewynters following two unsolicited approaches earlier this year. It is the opinion of the Board that shareholders' interests will best be served by the retention of Dewynters and the complementary acquisition of SpotCo, which will give the Group a dominant position in live entertainment advertising in the world's two most important markets: London's West End and New York's Broadway. The two agencies have collaborated on numerous worldwide campaigns in the past decade - for example, the musical Chicago, which reached 28 countries - and in joining forces will create new synergies by extending the global expertise and experience they can offer clients. Each company will also continue to work independently with other agencies and clients under their own identities.
SpotCo
SpotCo was founded in 1997 by Drew Hodges, its President and Chief Executive Officer, who is remaining with the business, together with his executive team.
The agency is known for creating innovatively conceived, strategically inspired and elegantly designed campaigns which both attract attention and deliver results.
SpotCo was credited with breathing new life into Broadway advertising with its first theatre campaign - a contemporary photomontage for the musical Rent. Today, it is a live entertainment advertising agency whose work at any given time spans around half the shows on Broadway. The agency is currently working on DreamWorks Theatrical's first musical, Shrek; the stage adaptation of 9 to 5; with Universal's Working Title on the acclaimed Billy Elliot, already a box-office hit in Britain and Australia; on a stage adaptation of the film Priscilla Queen of the Desert (in collaboration with Dewynters in London); and a revival of West Side Story. Beyond Broadway, SpotCo has worked on Cirque du Soleil's Zumanity and Avenue Q in Las Vegas, and as shows go on tour, its campaigns appear worldwide from Las Vegas to London, Melbourne to Moscow.
Demonstrating the calibre of the shows the agency attracts, over the last decade SpotCo's clients have won numerous Tony awards and an impressive six Pulitzer Prizes.
In addition to its theatre specialisation, SpotCo's work spans film and cable television, publishing and music. The agency employs around 55 staff at its offices on Seventh Avenue, New York.
In the financial year ended 31 December 2007, unaudited accounts show SpotCo had turnover of $39.3 million and profit before tax of $0.60 million. Net assets of SpotCo at 31 December 2007 amounted to $2.87 million. Following the acquisition of SpotCo, the Board is confident that the profits of both Dewynters and SpotCo will be significantly enhanced by the collaboration between the two companies.
Financing the acquisition
The acquisition of SpotCo has been funded through a new committed banking facility totalling £16.428 million, provided by Allied Irish Bank, whose support the Company continues to enjoy.
The Company has agreed to acquire the whole of the issued share capital of SpotCo for up to $18.86 million (subject to adjustment by reference to its net asset value as at 31 October 2008). The initial consideration is $5.5 million in cash. This is followed by three guaranteed cash payments of $1.5 million on the first three anniversaries of the completion date. If the EBITDA exceeds certain thresholds on each of the three anniversaries of the completion balance sheet date the following applies:
|
Profit Threshold |
Deferred Consideration |
|
|
Year 1 |
$1.25m - $1.75m |
$10 cash for every $10 of EBITDA within the threshold |
|
over $1.75m |
$20 cash for every $10 of EBITDA above the threshold |
|
|
Year 2 |
$1.50m - $2.00m |
$10 cash for every $10 of EBITDA within the threshold |
|
over $2.00m |
$20 cash for every $10 of EBITDA above the threshold
|
|
|
Year 3 |
$1.75m - $2.25m |
$10 cash for every $10 of EBITDA within the threshold |
|
over $2.25m |
$20 cash for every $10 of EBITDA above the threshold |
The annual deferred cash payments in respect of any one year are limited to $2.5 million with any excess cash consideration due being carried forward to the ensuing year and then continuing to roll over subject to the maximum annual payment of $2.5 million. In order to exceed the maximum deferred consideration, EBITDA for the three years post completion must total $9.8 million.
While the acquisition will have the effect of increasing Group debt, the profitability required to trigger the deferred consideration has the effect of improving the interest cover ratio.
Commenting on the acquisition, Jon Smith, Chief Executive of First Artist, said:
"Over the last decade Drew Hodges and his team, through their creativity and talent, their understanding of contemporary branding and imagery, and their involvement in productions from the earliest stages, have grown SpotCo into one of Broadway's foremost entertainment advertising agencies. We are delighted that SpotCo will join the First Artist Group where, working alongside Dewynters, there will be significant opportunities to enhance our services to clients and increase our presence on both sides of the Atlantic. In addition, we are particularly pleased to confirm that Anthony Pye-Jeary, the Managing Director of Dewynters, will be extending his service agreement.
First Artist remains committed to its vision to become the UK's leading integrated media, events and entertainment group and the acquisition of SpotCo demonstrates our commitment to this strategy. We look forward to providing all our clients with the most comprehensive range of services available and our shareholders with enhanced shareholder value".
Anthony Pye-Jeary, Managing Director of Dewynters said:
"This is a thrilling opportunity for us all and I am delighted that we are joining forces with such a creative and strategically forward-thinking team. Our clients will now benefit from a whole new direction in global thinking for both their existing and future productions".
Drew Hodges, President and CEO of SpotCo said:
"Live entertainment marketing and brand development is becoming increasingly international, demanding highly innovative solutions to entice many different audiences. Working with Dewynters, we can both produce even more groundbreaking work, and grow the dynamic creative spirit our teams are known for, whilst creating a consistency of image in any market, all of which benefits our clients tremendously".
|
First Artist Corporation plc Jon Smith, Chief Executive Julianne Coutts, Company Secretary |
www.firstartist.com tel: 020 7993 0000 |
|
Daniel Stewart & Company plc Nominated Adviser and Broker Lindsay Mair/Stewart Dick |
tel: 020 7776 6550 www.danielstewart.co.uk |
|
Redleaf Communications Emma Kane / Samantha Robbins |
Tel: 020 7822 0200 |
Notes to Editors:
First Artist Corporation plc was admitted to AIM in 2002.
First Artist's group companies are among the leading brands in their fields under the following categories:
Media - entertainment advertising, marketing, design, promotions, digital media, merchandising, signage and front of house displays for the West End, Broadway and Las Vegas via the Dewynters and Newman Displays brands. Strategic sponsorship consulting via Sponsorship Consulting, and sponsorship rights marketing through First Rights.
Events - offers a broad range of events such as conferences, company activity days, venue finding, delegate management and client events for private and public sector clients such as the Training & Development Agency, under its Finishing Touch business.
Entertainment/Sport - representation of media personalities and football players/clubs across the UK, Europe and the US by First Artist Management, First Artist Entertainment, Promosport and First Artist Scandinavia, together with wealth management through the Independent Financial Advisory firm, Optimal Wealth Management.
Related Shares:
R4E.L